You know that comparing car insurance quotes is the best way to save money, but there’s a worry holding you back: the fear that multiple credit checks could hurt your credit score. A lower credit score could cost you more down the line on car loans, mortgages, and even credit cards. Hence, the idea of damaging that significant number just by shopping around feels overwhelming.
This fear might leave you stuck with your current, possibly overpriced, insurance plan. You could be missing out on significant savings every year, all because you’re unsure if shopping around is worth the risk. It’s frustrating to feel trapped between wanting a better deal and protecting your financial health.
Here’s the good news: you absolutely can and should shop around for multiple car insurance quotes. The process is designed to protect your credit score, so getting a quote won’t hurt it. This guide will clear up the confusion and show you exactly how it works, giving you the confidence to shop for better coverage at a better price without worrying about your credit.
Do Car Insurance Quotes Affect Your Credit Score? The Simple Answer
No, getting a car insurance quote does not affect your credit score.
When you ask for a car insurance quote, insurance companies do look at your credit history. However, they use a special type of credit check called a soft inquiry or soft pull. This type of check does not impact your credit score at all.
Think of it as looking at your credit score. You can check it as many times as you want without it changing. A soft inquiry for an insurance quote works the same way. It allows the company to see your credit history without signalling to lenders that you are trying to borrow new money. This is very different from a “hard inquiry,” which can affect your score.
Understanding the Two Types of Credit Checks
To feel confident, it helps to know the difference between the two kinds of credit inquiries. Credit bureaus keep track of who looks at your credit report, and they separate these checks into two main groups.
What Is a Soft Inquiry?
A soft inquiry, also called a smooth pull, is a background review of your credit report. It does not affect your credit score. These things happen all the time without you even realizing it.
Soft inquiries are used for:
- You’re checking your credit. When you use a service to see your credit score, it is a soft pull.
- Companies are pre-approving you for offers. If you receive a credit card offer in the mail, the company likely conducted a soft inquiry first.
- Employers are doing background checks. Some jobs require a look at your credit history.
- Insurance companies are giving you a quote. This is the key reason why shopping for car insurance is safe for your credit.
The most important thing to remember is that only you can see the soft inquiries on your credit report. Lenders who are deciding whether to give you a loan cannot see your credit score. Because of this, soft inquiries have zero effect on your credit score.
What Is a Hard Inquiry?
A hard inquiry, also called a hard pull, is a more serious credit check. This happens when you officially apply for new credit.
Hard inquiries are used when you:
- Apply for a new credit card.
- Apply for a mortgage to buy a home.
- Apply for an auto loan to buy a car.
- Apply for a personal loan.
When a lender sees a hard inquiry on your report, it tells them you are actively trying to borrow money. If you have too many hard inquiries in a short time, lenders might think you are having financial trouble. For this reason, a hard inquiry can cause your credit score to dip by a few points for a short time.
Here is a simple table to show the difference:
| Feature | Soft Inquiry (Soft Pull) | Hard Inquiry (Hard Pull) |
| What is it? | A background check of your credit. | An official check is required when you apply for new credit. |
| Examples Include | Getting an insurance quote, checking your credit score, and applying for a car loan, credit card, or mortgage. | Getting an insurance quote, applying for a car loan, credit card, or mortgage. |
| Does it affect your score? | No, it never affects your credit score. | Yes, it can lower your score by a few points temporarily. |
| Who can see it? | Only you can see it on your credit report. | You and any lender who checks your credit can see it. |
Because getting a car insurance quote only creates a soft inquiry, you can get as many quotes as you need without any fear of it hurting your credit.
Your Regular Credit Score vs. Your Insurance Score
Here is something else that many people do not know. Insurance companies do not use your regular credit score to set your rate. Instead, they use the information in your credit report to create a special credit-based insurance score.
What Is a FICO or VantageScore? (Your Regular Credit Score)
Your regular credit score, like a FICO Score or VantageScore, is a number between 300 and 850. Its only job is to predict how likely you are to pay back money that you borrow. Lenders use it to decide if they should give you a loan and what interest rate to charge you.
Your regular credit score is based on five main things:
- Payment History: Do you pay your bills on time?
- Amounts Owed: How much of your available credit are you using?
- Length of Credit History: How long have you had credit accounts?
- New Credit: Have you applied for a lot of new credit recently?
- Credit Mix: Do you have different types of credit, like credit cards and loans?
What Is a Credit-Based Insurance Score?
A credit-based insurance score is a different number explicitly calculated for insurance companies. Its job is not to see if you pay your bills, but to predict how likely you are to file an insurance claim in the future.
This score uses some of the same information from your credit report, but it looks at it differently.
What an insurance score includes:
- Payment History: A long history of on-time payments is a good sign.
- Outstanding Debt: High balances on credit cards can be a negative factor.
- Length of Credit History: A longer credit history is generally better.
- Recent Credit Applications: Applying for multiple credit lines in a short period can be seen as a risk.
- Types of Credit: A healthy mix of credit types is positive.
It is essential to know what an insurance score does not include. By law, your insurance score cannot be based on personal information.
What an insurance score does NOT include:
- Race or skin colour
- Religion
- National origin
- Gender
- Marital status
- Age
- Income or job history
- Where you live
This protects you and ensures the score is based solely on your financial habits, not personal details.
Why Do Auto Insurance Companies Use Credit Information?
This is a fair question. What does your credit history have to do with how you drive? Insurance companies use these scores because many studies have shown a connection between financial habits and insurance claims.
Groups like the Federal Trade Commission (FTC) and the Insurance Information Institute (III) have studied this topic. They found that people with higher credit-based insurance scores tend to file fewer claims. On the other hand, people with lower scores are, statistically, more likely to file claims.
An easy way to think about it is this: managing your money well often means you are responsible in other parts of your life, including behind the wheel. It is not about judging you. It is about using numbers to predict risk. Since the main job of an insurance company is to manage risk, they use all the tools available to them to make their predictions as accurate as possible. By using these scores, they can charge everyone a rate that more closely matches their risk level.
Is Your Insurance Score the Only Thing That Matters?
Not. Your credit-based insurance score is just one piece of a large puzzle. Many other factors have a significant impact on the price of your automobile insurance.
Here are some of the most critical factors that help set your rate:
- Your Driving Record: This is a major one. A clean record with no accidents or tickets will help you get a lower price.
- Your Claims History: If you have filed a lot of claims in the past, companies may see you as a higher risk.
- Your Vehicle: The make, model, and year of your car matter. A new sports car will cost more to insure than an older, safer sedan. Safety features like airbags and anti-lock brakes can help lower your cost.
- Your Location: Where you live and park your car makes a difference. Rates can be higher in cities with more traffic and theft.
- How Much You Drive: The more miles you drive each year, the greater the risk of an accident.
- Your Age and Driving Experience: Younger, less experienced drivers typically pay more for insurance.
- Your Chosen Coverages: The amount of coverage you choose will directly affect your premium. A policy with higher limits and more protections will cost more than a basic policy.
- Your Deductible: A deductible is what you pay out of pocket before your insurance pays for a claim. Choosing a higher deductible can lower your monthly premium.
Your credit-based insurance score is important, but it works together with all these other factors to create your final quote.
Are There States That Ban Using Credit for Insurance?
Yes. While most states allow the use of credit-based insurance scores, a few states have passed laws that ban or limit the practice.
These states ban entirely the use of credit information for setting car insurance rates:
- California
- Hawaii
- Massachusetts
In these states, your car insurance quote will be based on other factors, but not your credit history.
Other states allow insurance companies to use credit information. Still, they have placed some limits on how it can be used. For example, some states may not allow a company to deny you coverage based on credit alone. These states include Maryland, Michigan, Oregon, Utah, and Washington. Rules can change, so it is always a good idea to check the laws in your specific state.
How You Can Improve Your Insurance Score to Save Money
Since your credit information can affect your insurance costs, improving it can lead to real savings. The good news is that the steps to improve your credit-based insurance score are the same as the steps to improve your regular credit score.
Here are some simple, decisive actions you can take:
- Pay All Your Bills on Time. This is the most critical factor. Even one late payment can have a negative impact. Set up automatic payments to make sure you never miss a due date.
- Keep Your Credit Card Balances Low. Try not to use more than 30% of the available credit on any of your credit cards. For example, if you have a card with a $1,000 limit, try to keep the balance below $300.
- Do Not Open Too Many New Accounts at Once. Each time you apply for new credit, it can cause a slight, temporary dip in your score. Only apply for new credit when you need it.
- Keep Older Accounts Open. A long credit history is a good thing. Even if you don’t use an old credit card frequently, keeping it open can help your score.
- Check Your Credit Reports for Errors. Mistakes happen. You should check your credit reports regularly to make sure all the information is correct.
Know Your Rights: The Fair Credit Reporting Act (FCRA)
You have rights when it comes to your credit information. The Fair Credit Reporting Act (FCRA) is a federal law that protects consumers.
Under the FCRA, you have the right to:
- Get a free copy of your credit report. You are entitled to one free report every 12 months from each of the three major credit bureaus: Equifax, Experian, and TransUnion. The only official, government-authorized website for this is annualcreditreport.com.
- Know if your information has been used against you. If an insurance company charges you a higher rate because of your credit information, they must tell you. This is called an “adverse action notice.”
- Dispute any information you think is inaccurate. If you find a mistake on your credit report, you have the right to dispute it with the credit bureau. The bureau must investigate your claim and correct any errors.
What to Do If You Find an Error or Suspect Fraud
Checking your credit reports is a great way to protect yourself from identity theft. If you see an inquiry from a company you do not recognize, it could be a sign of fraud.
If you think you might be a victim of identity theft, here are the steps to take right away:
- Contact the Credit Bureaus. Call one of the three major bureaus (Equifax, Experian, or TransUnion) and ask them to place a fraud alert on your credit file. The one you call is required to notify the other two. This alert makes it harder for someone to open new accounts in your name.
- Contact the Business. Call the company where the fraudulent activity happened. Ask to speak to their fraud department and explain the situation.
- Consider a Credit Freeze. For even stronger protection, you can ask the credit bureaus to freeze your credit. A credit freeze blocks lenders from accessing your credit report, which makes it very difficult for anyone to open a new account.
- Report the Theft to the FTC. Go to IdentityTheft.gov to file an official report with the Federal Trade Commission. This website provides a personalized recovery plan to help you fix the damage.
Frequently Asked Questions (FAQ)
Here are answers to a few more common questions about car insurance and credit.
Does getting a car insurance quote hurt your credit?
No. Getting a quote only requires a soft inquiry, which does not change your credit score.
How many car insurance quotes is too many?
There is no limit. Because quotes use soft inquiries, you can get as many as you want from different companies. Shopping around is the best way to find the lowest price.
Can I get car insurance without a credit check?
In most states, it is challenging to find a standard insurance company that does not use credit information. However, some companies specialize in providing insurance to people with poor credit or no credit history, though the rates may be higher. If you live in California, Hawaii, or Massachusetts, your credit will not be checked.
Will my car insurance rate increase if my credit score drops?
It might. Insurance companies often review your credit-based insurance score when your policy is up for renewal, which is usually every six or twelve months. If your score has gone down, your rate could increase at your next renewal. On the other hand, if your score improves, you could see your rate go down.
Shop with Confidence and Save
Understanding how your credit relates to car insurance puts you in control. Now you know that the fear of hurting your credit should never stop you from looking for a better deal. Shopping for automobile insurance quotes is an entirely safe and financially savvy thing to do.
Remember, companies use a special insurance score to predict risk, and getting a quote only results in a soft credit pull that does not harm your credit score. By practising good financial habits, you can improve your credit and potentially lower your insurance premiums over time.
So go ahead and gather quotes from several companies. Compare your options and choose the policy that gives you the best protection for the best price. You have the knowledge and the right to find a great deal.
