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Can Car Insurance Companies Verify Your Credit? (2024)

When you request auto insurance quotes, some providers ask for your Social Security number. In states that allow it, providers use your Social Security number to review your credit report and determine your credit-based insurance score. It’s one of the factors insurers in most states use to determine your premiums.

Understanding Your Credit-Based Insurance Score

Many insurance carriers check your credit to issue you a credit-based insurance score, which assesses how risky you are to the provider for an insurance policy. The higher your credit score is, the lower your car insurance rates can be. Some states, such as California, Hawaii, Michigan, and Massachusetts, prohibit insurance carriers from conducting credit checks. Insurance companies also use your driving history, gender, residence, and other factors to determine the cost of your auto insurance policy.

Why You Can Trust The MarketWatch Guides Team

The MarketWatch Guides Team is committed to providing reliable information to help you make the best decision possible about insuring your vehicle. Because consumers rely on us to provide objective and accurate information, we created a comprehensive rating system to formulate our rankings of the best car insurance companies. We collected data on dozens of auto insurance providers to grade the companies on a wide range of ranking factors. After 800 hours of research, the end result was an overall rating for each provider, with the insurers that scored the most points topping the list.

Does Your Credit Score Affect Your Car Insurance Rate?

In states where it’s permissible for insurance companies to check your credit, your credit score can affect your rate. And if you have a lower credit score, you could end up paying more for car insurance.

How Bad Credit Affects Car Insurance Costs

The average nationwide cost of full-coverage car insurance for a driver with poor credit is $3,829 per year. This is 91% more expensive than the average for a driver with a clean record and great credit, which is $2,008 per year, according to Quadrant Information Services.

Factors that Affect Car Insurance Rates

Factors that affect your car insurance rate range from preventable events, such as traffic tickets and accidents, to circumstances and attributes that are completely out of your control. These include location, age, driving record, credit history, gender, marital status, and vehicle type.

Why Do Car Insurance Companies Check Your Credit Score?

When you receive car insurance quotes, your carrier assesses the risk you present. One way to do this is by issuing you a credit-based insurance score. The insurer takes into account your insurance payment history and the length of your credit history to determine costs. If you have great credit with a history of paying your insurance bills on time and you haven’t had any accidents, you’ll pay a lower insurance rate. Conversely, if you have poor credit, lapses in insurance coverage, or a history of car accidents or speeding tickets, you could end up paying more.

States Where Credit Scores Don’t Affect Car Insurance Rates

Several states prohibit insurance companies from checking their customers’ credit histories. These states include California, Hawaii, Michigan, and Massachusetts.

Car Insurance Options for Drivers With Bad Credit

Having a low credit score can make it difficult to secure affordable car insurance rates. However, you can reduce your insurance premium in a few simple ways. We recommend using a form of usage-based insurance, like per-per-mile or safe driving programs.

Sign Up for Safe Driving Usage-Based Insurance

Telematics allows insurance companies to monitor your driving habits for a few weeks. Depending on the provider, you can either download an app or install a plug-in device on your vehicle. The carrier will monitor your driving behaviors for a test period. If you practice safe driving habits, you could save enough money to offset a portion of the premium increase related to your credit score.

Try Pay-per-Mile Insurance

Also known as pay-as-you-go insurance, pay-per-mile insurance charges come from the number of miles you drive every month. It’s ideal if you plan to drive short distances. And because it bases your car insurance quote on mileage, the provider might not check your credit. Root Insurance is one of the top providers of pay-per-mile insurance.

Collect Car Insurance Discounts To Offset More Expensive Premiums

Outside of usage-based safe driving or pay-per-mile programs, you can save on more expensive poor credit car insurance by looking at car insurance discounts. Nearly all car insurers have some discounts, such as multiple policies, multiple vehicles, good student, distant student, safe/accident-free driver, defensive driving, driver training, pay in full, automatic payments, and continuous insurance.

Improve Your Credit While You Pay Your Premiums

You can check out our guide on how to increase your credit score. It helps largely to know what makes up your credit score in the first place. There are five big factors that impact your credit score: payment history, amounts owed, length of credit history, credit mix, and new credit.

Check Your Credit Often

You’re entitled to a free credit report every year. All three credit bureaus (Experian, Equifax, and TransUnion) offer free credit reports at AnnualCreditReport.com. USA.gov offers several safe and secure options for requesting your credit report.

Be on the Lookout for Credit Fraud in Your Accounts

If you notice any errors on your credit report, contact the credit bureau and follow its process for disputing items. Newly opened accounts that you don’t recognize may signal identity theft. If you notice any suspicious activity on your credit report, follow the Federal Trade Commission’s (FTC) recommendations.

Do Car Insurance Companies Check Your Credit?: The Bottom Line

Unless you’re a resident of California, Hawaii, Michigan, or Massachusetts, your insurance carrier can check your credit and assign a credit-based insurance score as a risk assessment tool to predict your likelihood of filing a claim. If you have a lower credit score, you can consent to the use of telematics to get significant discounts or qualify for a usage-based policy. Remember that your credit is just one of the many factors that insurance providers use to determine risk, and many offer discounts that can help you lower your insurance costs.

Top Auto Insurance Recommendations

If you have experienced credit problems in the past, here are two of the best providers to consider:

Geico: Best for Budget-Conscious Drivers

Geico makes it easy to receive a quote within minutes through its website, mobile app, or a call to an insurance agent. You can use the provider’s generous discounts to offset the higher premiums.

Nationwide: Best for Usage-Based Insurance

Nationwide helps you lower your insurance prices through its SmartRide® program. You’ll get a 10% discount for signing up, and you can save up to 40% within 80 days for the safe driving habits you already practice regularly.

Our Methodology

Because consumers rely on us to provide objective and accurate information, we created a comprehensive rating system to formulate our rankings of the best car insurance companies. We collected data on dozens of auto insurance providers to grade the companies on a wide range of ranking factors. The end result was an overall rating for each provider, with the insurers that scored the most points topping the list.

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