Getting multiple car insurance quotes can save money. But does getting an auto insurance quote hurt your credit score? We have the answer.
Recently we wrote about how to compare auto insurance rates online. One question that has come up is whether getting an auto insurance quote will lower your credit score.
Car insurance companies today routinely pull your credit report and use your credit score and history as one factor in setting premiums. As we’ve discussed in the past, your credit history affects your finances in many ways. Car insurance premiums are a good example of this. The higher your score, the lower your premiums.
Here’s how Progressive explains the use of credit scores in its underwriting process:
Credit has been proven to be a very powerful and independent predictor of future accidents or insurance claims. The use of credit history provides an additional predictive factor — one not offered by other factors such as driving record, vehicle type, age, etc. In fact, Progressive data shows that consumers with the worst insurance scores are twice as likely to have an accident or insurance claim as those with the best scores.
In short, having really bad credit can definitely make your insurance premiums go up. And having great credit history can help those premiums go down. But your driving record will still have a bigger effect on your premiums than your credit score. So a terrible driver with a great credit score is still going to pay a lot for car insurance.
Get Your Car Insurance Quote Based on your Credit Score
It’s Not Your Actual Credit Score
Before we get further into this question, it’s important to note that car insurance companies aren’t looking at your real credit score. They don’t so much care about your numerical FICO or VantageScore.
Instead, they’re using your credit report information to create what’s called a credit-based insurance score. It looks at much of the same information. A history of late payments and a high amount of debt correlate with more auto insurance claims. However, your credit-based insurance score is likely weighted a bit differently than your FICO score. And you typically won’t see the numerical score an insurance company uses to determine your rates.
But Does it Affect Your Score?
But the question still remains. If car insurers pull your credit report during the application process, does that actually affect your credit? After all, credit inquiries can ding your credit score. But the credit report a car insurer pulls won’t actually affect your score, generally.
Why? It’s because insurance companies do what’s called a “soft pull” on your credit. There are two types of credit inquires, called a “soft pull” and a “hard pull:”
- A soft pull, also known as an involuntary inquiry, occurs when creditors want to send you pre-approved offers. That credit card solicitation you received in the mail was probably the result of a soft pull on your credit. Potential employers may check your credit as do your existing credit card accounts. Both of these are soft pulls. And if you check your own credit score, that’s considered a soft pull, too. The key is that a soft pull happens when you aren’t actively seeking out credit. So it has no effect on your credit score.
- A hard pull, also known as a voluntary inquiry, occurs anytime you actively seek credit and fill out an application. The lender will run your credit report and determine whether to approve your credit application and under what terms. A hard pull on your credit report indicates that you’re shopping for credit. So that will affect your credit score.
A car insurance carrier’s pull on your credit score seems, at first glance, to be somewhere in between. It is a voluntary inquiry, since you’ve actually applied for car insurance. But it’s not an indication that you’re seeking credit. For this reason, it usually comes as a soft pull that doesn’t affect your credit.
Here’s what other major insurers disclosure about pulling credit reports:
Geico explicitly states that it does pull credit reports where permitted by law. They confirm, however, that it does not affect an applicant’s credit score. They also describe your rights if your credit adversely affects your insurance premiums:
If GEICO has taken an adverse action against you (such as offering you a higher rate) as the result of information contained in your credit report, you may obtain a free copy of your credit report. If you believe there are errors in the report, you should notify the consumer reporting agency immediately.
Studies show a connection between credit characteristics and insurance claims, so many insurance companies use “Credit-Based Insurance Scores” to help determine rates (not applicable where prohibited by law).
If you spend any time on forums about credit, however, you’ll hear about individuals who say a car insurance company performed a hard pull on their credit. While one can’t rule this out, it seems unlikely to me.
What is more likely is that the individual sees the soft pull on their credit and assumes that it’s a hard inquiry because it’s visible to them on their credit report. Nevertheless, if you believe that an insurance quote resulted in a hard inquiry, leave a comment below sharing your experience with us.
Topics: Insurance
Shouldn’t insurance companies be required to state in their advertising that rates are based on credit worthiness? E-Surance states in their ad they save on average so much money yet they don’t mention that is due partly to credit score
I have to say that I have worked for many attorneys in my lifetime, and most of them are/were in the credit repair industry. ONE auto insurance quote won’t disrupt your score, but if you are getting a ton of quotes as well as potentially quotes from car dealerships, your score can drop a decent amount. Checking your OWN score won’t drop it at all, so staying on top of it at all times will help you know exactly what’s going on with your number.
Rob, thank you so much for this post. Last month I had to get a new car because my old car developed a fuel line leak that would cost more to repair than the car was worth. It was over ten years old but this was still a little sooner than I had planned. On top of which I had just paid my car insurance premium a couple of days before. I tried to notify my agent of the change and found out that I had a new agent. I am still waiting for a revised premium notice. I had been thinking about getting a quote on-line and this was my number one question. After reading this post as well as the comments, plus your other post about the top ten companies (mine is one of them!) I think I will just call a couple of agents directly. My credit union has a relationship with company, my hubby’s alumni association has another. Anyway I am so grateful I saw all of this before I made any moves.
I’m sorry this is late but for future reference: Repairing a vehicle is far cheaper than buying a new one!
1.Ref your statement above: “… a fuel line leak that would cost more to repair than the car was worth.” I ask you to define worth. I’ll use use my car as an example, a 2006 Scion tC, RS2. Kelley Blue Book lists fair market price as $3,765 – $5,492. Say that fuel leak is $3,500 -$6,000 (where you’d be getting shafted but for this example play along.) My insurance is $116.00 every 6-months and it has been paid off for many years. Now I ask you, can you buy any “new” car for “$0.00” per month? Sure! You can pay cash but that is significantly more than the cost of the repair and … 2. How much did your insurance increase every 6 months because your car is NEW?
So many only weigh a single aspect in repairing their car. Personally, I only buy a new car when “I” no longer want/need/like the dang thing. I’m fully aware that car insurance in addition to a car payment, my insurance will jump also. And if you’re planning to buy a home, WAIT until after you have that have purchased because that is a big hit on your credit!
Factor in the hassle of breaking down in the most opportune times as opposed to having a reliable new car. That to me is the main reason for buying new cars, you especially since my wife and kids also drive.
Can’t say I agree with this one bit. I recently inquired about my own credit and found that my score had been lowered for two reasons. NO installment loans and TOO many inquiries. Only I haven’t done anything other than compare insurance rates. The report said “too many inquiries” lowered score.
Be-Aware of Progressive
Also question can insurance companies get your social number without your knowledge and consent???
I was shopping around for insurance for my new car and while speaking to him. He mentioned that I had a quote with them, and he said can you verify your socials. I was shocked as I have never ever provided my SS# to any car insurance while just asking for a quote, how could they get it and that too without my consent.
First when I asked for the supervisor he was hesitant and transferred after 40 minutes when I refused to talk to him anymore
when I kept asking how they got my Social at first the agent said when I provided them my license they can retrieve my SS# and later on when I was talking to the supervisor she said they can never get an SS I gave them my social number. She said no you must provided it.
lies lies
Also, when I asked all my information to be deleted at first the agent said only SS can be deleted and not my license #, later when I spoke to the supervisor she said all my information is deleted except my name and birthdate.
SO shady, imagine if anyone with my similar name to mine gets a hold of my quote they can literally ruin my credit and God knows what?
Re: Hard Credit Inquiry by Progressive Auto Insurance
What can I do to get a hard credit inquiry removed? I did not give permission for this!
I use CreditKarma to keep on top of my credit score. Within 5 minutes of hanging up with Progressive after getting a quote from them to compare to my current insurance, CreditKarma sent me an email saying that there was a new HARD credit inquiry to my account. I did not give them authorization for this! They were very pushy, trying to get me to buy insurance then cancel if I changed my mind. I had to repeatedly tell them that this is a QUOTE ONLY. Finally hung up on them. Based on our records, CREDCO checked your credit report on August 28, 2013, resulting in a hard inquiry. Hard inquiries will typically fall off your credit report after about two years.
Here is the email I received from CreditKarma: “Based on our records, CREDCO checked your credit report on August 28, 2013, resulting in a hard inquiry. Hard inquiries will typically fall off your credit report after about two years.”
I have been requesting free quote from multiple car insurance companies and expected there to have no real effect, but today, I received an email “Federal Fair Credit Reporting Act Disclosure Notice
__ (state) CREDIT DISCLOSURE NOTICE
We reviewed your credit report and obtained a credit-based insurance score based on information contained in that report. An insurance score uses information from your credit report to help predict how often you are likely to file claims and how expensive those claims will be. Typical items from a credit report that could affect an insurance score include, but are not limited to, the following: payment history, number of revolving accounts, number of new accounts, the presence of collection accounts, bankruptcies and foreclosures. The insurance score is just one of many factors considered in determining your premium. Other such factors include your driving experience, accidents, and convictions.
The information used to develop the insurance score comes from ____ (credit union).”
I NEVER gave my social security number and am VERY confused how they can check my credit without it. This seems like a hard pull, which is frustrating. Can you shed some light on this?
Feb 2014 I had a credit score of 613 when I applied for a loan in July because my car broke down my credit score was a 565 the only thing I did was shopped around for car insurance
I would suggest doing a ‘credit freeze’ to your credit reports. This way, if anyone attempts to pull without your knowledge, they will not be able. In addition, if you are concern whether it is a ‘hard’ or ‘soft’ pull, contact the credit bureaus… equifax, experian or transunion for verification.
Once you get your quotes, you can conduct a quick search of the multiple companies
underwriting the policies and better determine which one not only offers a good value
but actually deserves your business. Upon request, a driver must
show this proof to a police officer. Before we discuss what happens if you only have liability insurance and you get into a crash, you should find
out what the required liability insurance limits are in
your state and what they mean.
I had received online quotes from esurance, geico, and usaa recently. I visited the site Credit Karma recently and noticed 3 hard inquiries had been added to my report. coincidence?
Joe, it’s no coincidence, I’m afraid. The real question is how did it affect your credit score?
I have just spent the last 3 weeks trying to work out why i cannot renew my mortgage. Went to a financial advisor a who checked my credit report and it turns out that I cannot get a mortgage because the insurance companies have done over 20 credit checks on me in the last 5 months. It took them a while to figure this out. My credit report ended up getting pulled apart by multiple different financial advisors because they couldn’t believe it, but every time the only reason anyone could find was because of the insurance credit checks.
Wow……you guys are some haters. Insurance in my state is definately a soft hit. And you social is not required (by most companies) to get one. And there are websites you go to to register your vehicle or renew your license or who knows what else that takes your info (and in the tiny print tells you they are selling your info to partners) and that is one way a lead is sold. the companies selling the leads present them to insurance agents who beleive the leads are ligit. Technology and shopping on line for insurance are not quite together yet. Never will be. Because in my state, and I assume most others, YOU HAVE TO HAVE A LICENSE TO QUOTE INSURANCE, therefore a consumer would never be able to “shop” on line. You need to call an insurance agent and let them shop for you. There are agents called “independent insurance agents” or brokers, who actually have more than one insurance company to give you prices from.
Soft Hits. Not Hard. I don’t know about elephant. I qot a quote from them this week and it better not show as a hard hit. Their rates were higher than anyone else anyway.
Insurance companies can pull a soft hit without your social security number, although some require that you give your social before they will give you a quote.
Insurance Haters will never be happy. No matter what. So just find an agent that is pleasant to speak with and answers the phone when you call. Agents do not charge more because they are a broker, they are paid commission for their work.
Maybe one day technology and the insurance industry will be on the same page, but right now it is just not possible to “shop” several different companies without involving an insurance agent.
Not true- Today I get a hard pull dropping my credit score by 35 points from researching an insurance quote bt elephant.com. Tomorrow it’s direct contact to Equifax and ELEPHANT as well as my local law enforcement agencies- any way to screw us all is in effect.
I have been driving for 34 years with 1 small accident (I caused) about 25 years ago. Nothing my fault since then. Now, I consider myself a VERY SAFE driver.
Good paying jobs are hard to find. Companies are cutting jobs right and left. This is the true reason for bad credit. I do not believe people stop paying bills are doing it on purpose. I am unemployed; food comes first, bills second. The little money I scrape up pays for food. My credit score is hosed and I am now paying MORE for car insurance.
I still have the SAME Insurance company since I started driving, yes 34 years. If anybody should know I am a safe driver it’s them. What I learned, they chance your policy number often so they have the “I did not know excuse”. My insurance company now has the money to sponsor NASCAR, have enough money to be a home mortgage lender and a credit card lender. Something is very ROTTEN here.
I would LOVE to know. Who started this? How did the insurance companies get my SSN in the first place? Your SSN was sacred, not to be disclosed for fear of identity theft. How did the insurance companies get away with checking it illegally? I know that politicians are involved, they have to be. I just wish I knew which ones and which parties. I searched the internet and found no answers. The insurance lobbyists donate MEGA money to political campaigns. But we are still the VOTERS.
Does anybody know which politicians?
Thanks,
Michael
You are soooo rite. My blood pressure is through the roof now after reading everyone’s experiences. I’m afraid to to even shop for insurance now.
whooo…boy! now I wish I hadn’t filled out the quote request.
this is the hook that got me: “how to compare auto insurance rates online”
hmmm… I thought it was going to pull numbers and post quotes so I could compare, instead I got a note saying I was “matched” with insurance providers who would be contacting me.
now I REALLY wish I hadn’t filled out the forms, and there is no way to cancel….
After reading a few things online, now I’m more confused than before. I do know I want to compare rates b/c mine (in NJ) has gone WAY up in the past 2 renewals. But I do not want to be “matched” or get calls and mail. I just want to see the information for myself and decide. I also don’t want them staying on my credit report as multiple soft pulls, much less hard pulls.
Any ideas out there?
I am in the same boat as Hate to disagree. Although, a slight difference to the story. With me, someone entered my information (unknown how obtained) on several different agent data base sites. Now for the last 2 weeks I have been bombarded with cell phone calls and letters in the mail. It has been extememly horrible and expensive for me to rectify this.
I have been extemely enlightened on the horrible business ethic used by these types of companies. Everyone I called said it is just a bad experience and to “wait it out” and it will pass. Forgive me, but why the heck should I have to wait for you to remove all “leads” your company sent. They blame it on the computer systems not set up to reclaim or return leads. I know have several 50+ agents pulling my credit. And, no, it is NOT all soft pulls.
For me to stop the pulls I have to spend $10 on each of the 3 major credit bureaus to have a password put on the accounts. This will require the company pulling credit to obtain the password from me first. What a hassel. And this is because, they have no “safety net” is in place with these agent databased referral services. My situation is not an isolated event. Even the customer service reps for these companies say it happens quite frequently. Sad, sad, sad business practice. Again, the “good consumer” who pays bills on time, doesnt live beyond their means and practices good financial morals, gets hurt in, the form of credit worthiness. Shame on you for not protecting the comsumers “you” represent.
A couple of months back, I used netquote to see how my car insurance rates compared to other companies. Don’t believe the “instant quote” hype associated with these types of services. In return for me divulging my information, I received an automated “thank you” and then telephone calls for the next two weeks from every insurance agent in the local area. Needless to say, I was not pleased. To rub a little salt into the wound, I just found out that I now have eleven inquiries on my credit report.
I don’t know if they are “soft pulls” or “hard pulls,” but I do know for a fact that I filled out ONE quote request, and now have 11 separate inquires that show up. I can’t speak for the veracity of the rest of the article, but I can unequivocally state that “…only one inquiry results on your credit score. They are able to use that one inquiry to generate multiple insurance quotes from various insurance carriers.” does not hold true as of 3/30/2010.
HateToDisagree, you will see the inquires, but they should be soft pulls. Anyway, sorry to hear about the bad experience.
Thank you for explaining what to me had been a very gray area.