Do auto insurance quotes affect your credit score?
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UPDATED: Sep 24, 2021
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In nearly all states in the U.S.A., car insurance is a legal requirement. It protects you and other drivers financially in the event of an accident. Although it can be difficult for some drivers to fit car insurance into their budget, there are ways to make car insurance more affordable. What you may not know is that there are many different factors that car insurance companies consider before deciding to insure you and giving your a price for your auto insurance premium. For most auto insurance companies, one of the factors is consumer credit. However they can also ask for your marital status, if you pay your bills on time, and whether or not you have a clean driving record. They may seem like strange things for a company to need, but if you think of it from the business stand point, they need to know that you’re going to be a reliable client.
If you are not sure you are paying the best possible price for your auto insurance, consider using an online auto insurance price comparison tool. Compare car insurance rates now by using our FREE tool above!
What are the factors that go into auto insurance pricing?
Depending on which auto insurance company you use, there are several different factors that are weighed to determined the price you pay for your auto insurance. These are the main factors:
- Driving History- How long you have been driving, as well as any recent traffic accidents or tickets will help underwriters to determine how much of a risk you are, and therefore, how much you will pay for your auto insurance premium.
People who have a longer driving history can expect their premiums to be less, and people with better driving histories will likely see the same.
- Consumer Credit History- Unfortunately, your credit score can be one of the most important factors when it comes to determining the price tag of your policy. Your credit is checked and this information is used to credit a credit-based insurance score, which will be weighted with other factors when the price of your policy is determined. This is because some car insurance companies believe that consumers with fair or poor credit are more likely to file a claim on their auto insurance, which makes these consumers more of a risk to the insurance companies. Car insurance companies will run a credit check to examine various parts of your credit report, such as payment history, high balances, history of bankruptcy, accounts, if any, that are in collections and the length of your credit history when determining your credit-based insurance score. Make your monthly payments on time – this can help you get rid of any bad credit that might stand in your way of cheaper insurance.
- Where you live- Certain states and cities are more prone to auto thefts and vandalism. In addition, accidents will cost more in certain areas of the country; certain states have laws regarding how much insurance companies can be sued for, and some do not. Since most companies want to continue being able to offer competitive rates, they’re going to have to look at what the average cost of insuring you is going to cost them, and that will depend on location. These facts cause auto insurance companies to use where you live to help determine your rate.
- How often and where you drive your car- If you drive your car five miles to work, you will likely pay a lower premium than someone who drives 20 miles to work. In the same way, if you work five days a week, you may pay more than someone who only works two days per week, because your time frame spent driving is different. If you’re on the road for a shorter period of time, you’re less likely to run into any issues. The more you drive, the more likely you are to get into an accident, putting you in a higher risk group for your insurance company.
- Where your car is parked- This might seem like a strange one, but it can be a big decision for a driver. The best place to park your car is in a locked garage at your residence. This will help defray the cost of your car insurance premium and make it less likely that it will be stolen, damaged by the weather, or vandalized. Cars that are parked along the street will have owners who pay more for their premiums.
- Age and Gender- Unfortunately, you cannot do much to change these two factors. Data from car insurance companies show that younger drivers will pay more for their premiums as their inexperience puts them in a higher risk group. Men are also more likely to have risky driving behaviors and more likely to drive while under the influence than women. Insurance companies often look at a teen driver as being high-risk because they don’t have as much experience as someone who has been driving for years. This is why your driver profile is taken into consideration.
- Type of Vehicle- Certain types of vehicles are more at risk for theft and perform poorly in an accident. If you have one of these cars, you are in a higher risk group. High-risk drivers are usually the ones that speed, disobey traffic laws, and have illegal additions put onto their vehicles. Your insurance company will take this information into account when determining your policy.
- Types and Amounts of Coverage- There are several different types of coverage that you can purchase on your auto insurance policy. Each part covers different circumstances. For instance, a different part of your policy will cover a collision with a deer than if you have an accident with another vehicle. You can also select different financial limits to your policy and the more coverage you purchase the higher the price tag will be. Because there are different types of insurance, there are going to be various financial obligations as well.
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Will my credit score go down after a car insurance quote?
It is common knowledge that credit inquiries can bring down a person’s credit score and keep them from getting cheaper rates and terms in the near future. However, the same is not true for inquiries related to car insurance quotes.
Although many consumers may be dismayed that their credit score can be pulled by their potential auto insurance company when obtaining a quote, the good news is that this information cannot be accessed by other people, lenders, or other companies.
Auto insurance companies only do a soft pull when getting your credit report. A soft pull, sometimes called a soft inquiry as well, will remain on your credit report, but can only be seen by you. A soft pull is also done by companies that provide pre-approvals for credit. As opposed to hard pulls which are done anytime you apply for credit such as a new credit card, a mortgage, or a car loan, which stay on your credit report for a length of time and are viewable to other companies. Hard pulls can bring your credit score down as it shows you are seeking new lines of credit, whereas soft pulls do not.
Can you find convenient quotes?
If you believe you are paying too much for auto insurance, it might be time to shop around for auto insurance. You can do this without the fear that obtaining multiple insurance quotes will decrease your credit score, and all but ruin your chances of getting good interest rates on loans, let alone an affordable car insurance quote. The easiest way to compare auto insurance is to use an online comparison tool. Trying to find an auto policy that won’t tuck you into financial ruin shouldn’t be stressful, which is why it’s nice to see such options available.
The internet has much it much easier to obtain multiple quotes, as previously drivers would have to call multiple companies and may not have been sure of what they were comparing. You can shop for an auto insurance policy online using a price comparison calculator with confidence, knowing that you will get the best prices and that your credit score will not be affected by multiple quotes. Enter your zip code in our FREE tool below to start comparing car insurance rates now!