Does Getting a Car Insurance Quote Affect Your Credit?

When seeking a car insurance quote, many individuals wonder if this action could impact their credit score. Car insurance companies often consider financial responsibility when calculating premiums, raising questions about the credit check involved. Understanding the types of credit inquiries is important for anyone navigating the process of obtaining an insurance quote.

Understanding Credit Inquiries

Credit inquiries are records of requests to review credit information. These inquiries are categorized into two main types: soft inquiries and hard inquiries. The distinction between these types lies in their purpose and their effect on a credit score.

A soft inquiry, sometimes referred to as a soft pull or soft credit check, occurs when a person or company reviews your credit report without a new credit application. Examples include checking your own credit score, pre-approved credit card offers, or background checks by employers or landlords. These inquiries are generally only visible to you and the entity that performed them, and they do not affect your credit score.

In contrast, a hard inquiry, also known as a hard pull or hard credit check, typically happens when you apply for new credit, such as a mortgage, an auto loan, or a new credit card. This indicates a lender is assessing your creditworthiness for a lending decision. Hard inquiries can cause a slight, temporary drop in your credit score, usually by fewer than five points, and they remain on your credit report for up to two years, though their impact typically lessens after one year.

Car Insurance Quotes and Credit Checks

When you request a car insurance quote, the insurance company typically performs a soft inquiry on your credit report. While they access credit information to help determine your premium, this action does not negatively affect your credit score. You can obtain multiple car insurance quotes without concern that these inquiries will lower your credit standing.

Insurers utilize credit information, often in the form of a credit-based insurance score, as a risk assessment tool. This score is different from the traditional credit scores used by lenders and is designed to predict the likelihood of future claims or payment issues, rather than the risk of defaulting on a loan. Studies suggest a correlation between credit history and the likelihood of filing insurance claims, with higher credit scores often correlating with a lower risk of claims. This allows insurers to determine premiums based on perceived risk.

Information Insurers Use Beyond Credit

Beyond credit information, car insurance companies consider numerous other factors when calculating premiums. Your driving history, including past accidents, traffic violations, and claims history, significantly influences your rates.

The type of vehicle you drive, its make, model, safety features, and even its garaging address also play a role. Personal demographic details such as your age, marital status, and the number of years of driving experience are also commonly factored into premium calculations. Additionally, the amount of coverage you select, your chosen deductibles, and any discounts for which you qualify, such as multi-policy or multi-car discounts, all contribute to the final insurance premium.