Al Boenker Insurance Blog - Myth of Fact: Can Credit Score Affect Your Car Insurance?
Some insurance companies (not everyone) require to run or check your credit score before offering their services.
Keep in mind: In most of the cases, before an insurance company runs your credit for a quote you need to allow them to do that.
Your credit score could affect your car insurance rates and premium but it isn't the only factor that determines it.
Insurance companies need to evaluate other factors such as:
- Driving record
- Your age
- The kind of car
- Miles and you driving routine
- Your home and the way you protect your car- think garage.
- Your neighborhood
Click To Read More: What Determines My Insurance Rate?
A low credit score could cause your premium to uprate but having a good score isn't the only thing that matters. Having a good credit score and a low driving record, for example, could increase the premium as well.
It's a combination of multiple factors that insurance companies analyze before giving coverage. Balance is key to getting an affordable rate.
What is an insurance credit score?
It's the information based on your credit history report that insurance companies use to calculate how likely you're to file a claim and also to know how much coverage brings you in order to ability to pay.
Is based on your credit history and shows the ability to pay back a loan over a period of time.
Is based on multiple factors such as driving history, accidents, policyholders and can determine your likelihood of being involved in an accident.
Why do insurance companies want your credit score?
Insurance companies request your credit score information (and other factors) for some of the following reasons:
- Determine your coverage
- Determine your coverage limit
- Used for a rating factor
What insurance companies want to evaluate is how risky of a driver you might be. This helps them calculate your potential likeness of filing a claim. If they estimate a person may be more likely to file a claim, the premium could increase if the policy is based on a credit score.
Click To Read More: What Factors Affect My Car Insurance?
Do all insurance companies use credit scores to determine rates?
In Texas, most of the insurance companies do. Check out the list of which company require to check your credit score before and which one don't.
Can an insurance company deny me coverage because of my credit score?
It depends on the type of policy and varies based on every insurance company, in general terms they can do it but there are some exceptions that protect people who are in a vulnerable situation:
In Texas, according to Texas Insurance Department, insurance companies can't deny to cover you if your credit score was hurt because of:
- Temporary loss of employment
- Victim of identity theft
- Death of your spouse, child or parent
Be sure to send a request and provide documents that prove your situation and they can do the exception correctly.
What is a good credit score for car insurance?
You can take this as a guide to what some loan companies and banks consider as a good or bad credit score.
Having a good credit score affect your car insurance in a positive way, just remember it's not the only factor to take into consideration.
Looking at the table above, we can say that more than 740 is a great credit score for the majority of auto insurance companies, and if you have a good driving record, safety features such as brake assist and you drive locally, there is a good chance you may have received a lower auto insurance rates.
Does getting an insurance quote to affect your credit?
It doesn't affect your credit score because is a soft pull, which means the company just checks your credit report, not in a deep way.
What can affect your credit score is a delay on payments, a lot of claims or missed payments.