Having your credit history looked at is a common occurrence in the car insurance industry. This can be extremely unfortunate for some people. Having bad credit can have a hugely negative impact on your insurance premium. When an insurance company sees that you have bad credit, they are not going to trust you as a driver or as someone who will always pay for their car insurance. The more issues that are likely to arise from a particular driver, the more time they are going to have to pay agents to deal with problems. Due to this reason, car insurance rates for people with bad credit are usually fairly high.

Do Insurance Quotes Affect My Credit Score?

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Fortunately, getting an auto insurance quote does not affect your credit score negatively. This is due to how an insurance company pulls your credit score. There are two different types of pulls that can be done to check your credit. The type that actually affects your credit score is known as a hard pull. When you are looking for a loan or are actively seeking out your credit, you are going to have a hard pull done on your score. The more times you seek credit, and have to have a hard pull done to your credit, the lower your score will become. A soft pull is an inquiry into your credit score that you can do to check your own credit or that others do before they send you an offer. These types of checks have no influence on your credit score. They simply provide financial information.

How Do I Know If My Bad Credit Has Affected My Car Insurance Rate?

It is very difficult to be able to tell if your bad credit has impacted your car insurance rates. One of the best ways to tell is by looking at your previous driving record and comparing your car insurance to that of your peers. Other than that, you could ask your car insurance company. It is kind of unlikely that they will tell you if your bad credit has affected your current insurance rates, however. Car insurance companies don’t like to share how they come up with their car insurance rates. This allows them to be able to charge whatever they like without people arguing with them.

Do Insurance Companies Do Credit Checks for Car Insurance?

When insurance companies check your credit score, they do a soft pull on your credit score. The majority of insurance companies do pull your credit score to help them determine your car insurance rates. It is possible to get a policy without a check of your credit, but it is likely that you’re going to have to pay a lot more money for an insurance policy. Usually, only high-risk insurance providers don’t check your credit score before offering you an insurance policy. It is estimated that in the United States around 90% of car insurance companies use credit score to help determine your car insurance rate. Due to this reason, it is safe to say that Canadian car insurance companies also have the same approach.

How Do I Improve My Credit Score for Insurance Purposes?

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Unfortunately, it is not that easy to repair a credit score. Usually, issues with your credit will impact your credit report for up to seven years. However, paying your bills on time can help to improve your credit score. The more often you pay your bills on time, the more likely it is that your insurance score will increase. Any problem with your credit in the past is going to look a whole lot better to car insurance companies if you have fixed the issue and have been paying your bills on time.

How Much Does High-Risk Car Insurance Cost?

When you have a bad credit score, you might be deemed a high-risk driver to insure. The worse of a credit score you have, the more likely it is that you’re going to miss a car insurance payment. By missing other payments, which is reflected in your credit score, an insurance company can tell whether you are responsible or not. A person who is not responsible is more likely to drive recklessly on the road and get into an accident. A study was done on the people who have the highest credit scores compared to people with the lowest credit scores. In this study, car insurance prices changed drastically. For a person with a high credit score, they would pay $558 a year. A person who had an extremely low credit score in the bottom 10% of people had to pay $918 for the same insurance that year.

Do You Need Credit to Get a Car Insurance Policy?

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No, you typically do not need credit to get car insurance. However, once you have credit, it can increase or decrease your car insurance. Your car insurance company can easily get access to your credit score. Usually, you cannot build up credit until you’re 18 years of age. A lot of people get their full license when they are 17 years of age. This is another reason that insurance is more expensive for younger drivers. Younger drivers do not have a history that insurance companies can look at. They really have no idea what they are getting into. However, just because you have no credit score does not mean you can’t get car insurance. You just might have a bit of a harder time getting a lower car insurance rate.

To Conclude

Your credit score is definitely an important factor in determining your car insurance rate. A credit score is a great way to determine if a person is responsible or not. The better the credit score you have, the less your insurance company will worry about you being irresponsible. It is important to realize that if you have a bad credit score now, you might have to get insurance through a high-risk insurance company. However, this does not mean that you’re always going to be stuck in this situation. Try your best to pay your insurance bills on time. If you do so for a long enough period of time, it is likely that a different, cheaper insurance company will take you on as a client.

Resources:

https://www.wellsfargo.com/financial-education/basic-finances/financial-challenges/repair-credit/affect-credit-score/
https://www.doughroller.net/insurance/auto-insurance-quote-hurt-credit-score/