Smart Auto Insurance Blog

It is becoming more widely known that many auto insurance companies use the credit score when calculating auto insurance quotes for those shopping around.  Whether you agree with it or not, insurers have found that credit history is a powerful predictor of what kind of driver you are.

According to the article “Does Getting An Auto Insurance Quote Hurt Your Credit Score” by DR on Doughroller.com, Progressive has data to show that consumers with the worst scores are often twice as likely to have an accident or file a claim compared to consumers with the best scores.  But a question that has been on the minds of many credit conscious consumers is how does it affect your credit score when you get auto insurance quotes from an insurer?

The answer is that it affects your score minimally.  Auto insurers are using what’s called “a soft pull” when they look at your file.  This is a way for people to look at your credit file without it affecting your score.  When you get pre-approved offers, are interviewing for jobs, or look at your own credit score these are all using “soft pulls”.  A “hard pull” is used when you are shopping for credit and it can negatively affect your score.  This is often known as a “voluntary pull” and it affects your score because seeking excessive credit is viewed as a risk factor.

Joe Ducey from abc15.com wrote the article “Why falling credit may cost you higher insurance premiums” which has some great information about watching your credit so your auto insurance rates are not affected.  He contacted the American Insurance Association for some more information on how and why your credit rating affects your premium.

Basically, your credit rating determines predictive behavior and research shows it does impact how many claims you file and how much they will cost.  It’s called “risky behavior”.  There are other seemingly unusual factors that go into determining your auto insurance rate such as if you are smoker, if you drive during rush hour, if you are good student and how many miles you drive.  The criteria varies between auto insurance companies, so it can be beneficial to shop around. 

This is yet another reason to keep a close eye on your credit report and check it regularly.  Not only does it affect your auto insurance rates, but it affects your mortgage rates, car loan rates and other insurance rates!