Do you need a credit score to get insurance?
Depending on the state you live in, auto insurance companies could use your credit score to determine whether to give you coverage and what rates to charge you for it. Insurance underwriters calculate the risk of being your provider.
California
Insurance companies in California don't use credit-based scores or your credit history for underwriting or rating auto policies, or setting rates for homeowners insurance. As a result, your credit won't impact your ability to get or renew a policy, or how much you pay in premiums.
Most insurance companies using credit information will include it as a factor in determining your rate. For example, someone with a relatively high credit score may pay a lower premium than someone with a relatively low credit score.
The score is based on the individual's credit rating and will affect the premiums they pay for the coverage. Low scores reflect higher risk, so a high score will result in lower insurance premiums. Conversely, a low score will result in higher premiums.
Which insurance companies don't use credit scores? All major car insurance companies — including GEICO, Progressive and State Farm — do a credit check during the quoting process. In fact, credit is one of the major rating factors used by underwriters when determining car insurance rates.
That's because insurers can show statistics indicating that drivers with poor credit are more likely to file claims (costing the insurer money) than those with good credit. Industry representatives often argue that credit helps them accurately price rates, which benefits consumers.
According to a survey by Conning and Co., over 92% of all major insurers, including GEICO, use credit-based insurance scores to help determine insurance premiums in most states. In many cases, this information helps lower the cost of insurance.
Credit-based insurance scores were introduced by the Fair Isaac Corporation (FICO) in the early 1990s. FICO estimates approximately 95% of auto insurers and 85% of homeowners' insurers use credit-based insurance scores in states where it is a legally allowed underwriting or risk classification factor.
Although ranges vary depending on the credit scoring model, generally credit scores from 580 to 669 are considered fair; 670 to 739 are considered good; 740 to 799 are considered very good; and 800 and up are considered excellent.
Paying your bills on time Is one of the most important steps in improving your credit score. Pay down your credit card balances to keep your overall credit use low. You can also phone your credit card company and ask for a credit increase, and this shouldn't take more than an hour.
What is a good credit score for insurance?
| Score range | Rating |
|---|---|
| 776 – 977 | Good |
| 626 – 775 | Average |
| 501 – 625 | Below average |
| 200 – 500 | Poor |
Using the LexisNexis Risk Classifier, an insurance score of 770 or higher out of 997 is considered good and will get you a favorable premium. A score of 500 or below is considered poor and could result in higher premiums or being turned down for coverage.
Most U.S. insurance companies use credit-based insurance scores along with your driving history, claims history and many other factors to establish eligibility for payment plans and to help determine insurance rates. (Again, except in California, Hawaii and Massachusetts).
The most affordable auto insurance for drivers with bad credit is from Nationwide, GEICO or USAA, according to our research.
Every major car insurance company checks your credit before offering a binding quote. That includes Geico, State Farm, USAA, Progressive, Allstate and Liberty Mutual. Only a few insurance companies do not check your credit.
Why do insurance companies use credit information? Some insurance companies have shown that information in a credit report can predict which consumers are likely to file insurance claims. They believe that consumers who are more likely to file claims should pay more for their insurance.
On average, drivers with poor credit pay 118 percent more for full coverage car insurance than those with excellent credit. California, Hawaii, Massachusetts and Michigan prohibit or limit the use of credit as a rating factor in determining auto insurance rates.
Some auto insurance companies use credit-based insurance scores to help them decide whether to offer someone an insurance policy and the premiums for the policy. These scores are based on one of your consumer credit reports.
An insurance score is a score calculated from information on your credit report. Credit information is very predictive of future accidents or insurance claims, which is why Progressive, and most insurers, uses this information to help develop more accurate rates.
Yes, Liberty Mutual does use your credit score as a factor when determining your car insurance rates, as do most major insurers. However, credit checks by auto insurers do not harm your credit score and are only done in states where it is legal for your credit score to affect your rates.
Is insurance a hard credit check?
Does getting insurance quotes affect your credit score? No, there is no hard credit pull when you get a car insurance quote, so shopping around won't affect your credit score. A hard credit pull generally happens when you apply for credit, such as a mortgage or credit card.
While older models of credit scores used to go as high as 900, you can no longer achieve a 900 credit score. The highest score you can receive today is 850. Anything above 800 is considered an excellent credit score.
For most credit-scoring models, including VantageScore 3.0 and FICO, the highest credit score possible is 850. We were able to speak to two Americans who belong to the exclusive FICO 850 Club: Brad Stevens of Austin, Texas, and John Ulzheimer of Atlanta.
Consider yourself in “good” shape if your credit score is above the average for people in your age group. Given that the average credit score for people aged 18 to 25 is 679, a score between 679 and 687 (the average for people aged 26 to 41) could be considered “good”.
- Review Your Credit Report. ...
- Pay Your Bills on Time. ...
- Ask for Late Payment Forgiveness. ...
- Keep Credit Card Balances Low. ...
- Keep Old Credit Cards Active. ...
- Become an Authorized User. ...
- Consider a Credit Builder Loan. ...
- Take Out a Secured Credit Card.
