Getting a car insurance quote does it impact on your credit score
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Credit scores are used in the United States to determine creditworthiness. Most people have a basic understanding of what credit scores are and how they impact their finances. Applying for credit cards, loans, or a mortgage all involve credit scores. Each loan application can affect your credit score.
We will address the questions regarding applying for car insurance and the impact on your credit score. Additionally, we will provide information on standard credit terms.
Is a credit check required by car insurance companies when obtaining a quote?
Yes, car insurance companies generally perform a credit check when providing quotes. However, they typically use a “soft inquiry” during the quote process, which does not affect your credit score.
Soft inquiries may not impact your credit score.
Hard inquiry: may change credit score
Is there a correlation between credit score and car insurance rates?
Your credit score is not typically a factor in determining your insurance premium or rate. Insurance provider uses specific credit characteristics in the insurance application process. Your quote will not hurt your credit score but may appear as a “soft inquiry” on your credit report.
Can obtaining an auto insurance quote impact your credit score?
Soft inquiries like those seen when getting an auto insurance quote are not tied to a specific credit application. These inquiries are listed on your credit report to monitor who has accessed your credit history. It is essential to consider hard inquiries because a lender checking your credit for a loan decision can notably affect your credit score when obtaining a car insurance quote.
What are some options for car insurance without a credit check?
Your credit score doesn’t affect your insurance premium in certain states like California, Hawaii, Massachusetts, and Michigan. Legislators in these states believe credit score evaluation could be unfair to low-income drivers. If you reside in one of these states, you don’t have to worry about your credit affecting your insurance rates.
Only options for car insurance with a credit check exist outside of these states. However, you can still find affordable coverage by exploring different providers or looking into usage-based telematics programs.
Telematics car insurance
Telematics and usage-based car insurance programs are available for drivers concerned about credit checks. These programs determine insurance rates based on driving performance and frequency, as monitored by an in-car device or mobile app.
Usage-based insurance allows them to save on their car insurance premiums by considering their driving habits rather than non-driving related factors such as credit score. Although new in the insurance industry, telematics programs are becoming more widespread among popular companies alongside their traditional pricing models.
Telematics can monitor the following:
- Harsh braking
- Rapid acceleration
- Mileage
- Time of day driven
- The use of mobile devices while driving is a safety concern.
Key terms related to insurance and credit reports.
Understanding car insurance and credit can be complex, but here are some key terms to help you navigate both when getting a car insurance quote.
A credit report is a detailed summary of your credit history and acts as a reference for lenders.
Your credit score is resolved by an algorithm that assesses your creditworthiness using information from your credit report at a specific moment.
Hard inquiries, also called hard pulls, occur when a financial institution checks your credit history to make a lending decision. Authorization is usually required, and it can impact your credit score.
Soft inquiries, also called ‘soft pulls,’ are commonly used when individuals or companies check your credit history for background checks or other legitimate reasons. Credit card issuers may conduct soft inquiries to determine your eligibility for specific card offers, and employers may also run soft inquiries before hiring you.
When obtaining car insurance quotes, it’s essential to consider that they typically fall under the category of a soft inquiry, which does not impact your credit score. If you want a car insurance quote that won’t affect your credit score, consider checking out insurer here.
