Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health in...

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Reviewed by Jeffrey Johnson
Insurance Lawyer

UPDATED: Jul 14, 2021

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In a nutshell...

When you’re buying a car, the dealer can take your credit score down a few points by running your credit to see if you qualify for a low-interest vehicle loan.

Multiple credit inquiries made within a 14-day time frame won’t hurt your score, but multiple inquiries made over a period of a month or more will.

Since shopping for an auto loan can impact your score, it’s only reasonable to wonder if shopping around for a cheap auto policy can have the same impact.

Fortunately for you, the credit information used to determine creditworthiness isn’t the same as the credit information used to calculate insurance costs.

Enter your zip code above to get FREE car insurance quotes today!

Does credit affect your car insurance rates?

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When you request a quote for auto insurance coverage, the insurer may ask you to rate your credit score on a scale from poor to excellent.

It seems like an invasive question when you’re simply trying to get auto insurance, but it’s a relevant one. In most states, insurance carriers can access information in your credit file.

The purpose of accessing information in your credit report isn’t to see if you’re creditworthy, it’s to see if you’re in a financial situation where you’re more likely to file a claim.

Research shows people who have late payments, high credit card balances, and other blemishes on their credit are more likely to file an insurance claim.

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When does the insurer run your credit?

By law, in states where insurance providers can use credit, the company must give the client a disclosure showing what the company is looking for.

The disclosure will also detail which credit rating bureau the report is pulled from so that you can request a consumer copy.

The insurance agent doesn’t access your credit and assigns a grade. Instead, the agent requests a record from a third-party rating bureau that develops its own insurance score.

Most companies will go through either Lexis Nexis or FICO when they are ordering an applicant’s score.

What does it mean when they say the inquiry is a soft hit?

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So you know that getting quotes won’t affect your credit ranking, but does submitting an application for coverage have an effect?

There is a major difference between a credit inquiry for a loan and a credit inquiry for insurance. When you make an inquiry to see if you qualify for a loan, it’s a hard hit that will take your score down.

When you make an inquiry for insurance, it’s a soft hit. Soft hits are used for informational purposes only and won’t reduce your score.

Does paying your premiums late affect your credit?

If you make a late payment on a credit card or a line of credit, it will be reported to the credit bureau.

These late payments are documented, and any future lender will be able to use the records to charge you a higher rate.

Luckily, a late payment on your auto policy isn’t reported, but it may affect your reputation as a good insurance customer.

If you want low insurance rates, having a good credit score is one way to get discounts. While credit does impact your rates, your insurance doesn’t directly affect your credit.

One way to go about building credit while you pay your premiums is to use a credit cardEnter your zip code below for FREE car insurance quotes today!