It's true that insurance companies check your credit score when they give you a quote. However, what they're doing is called “soft searching,” a type of query that won't affect your credit rating. You'll be able to see these inquiries in your personal credit reports, but that's about it. Insurance quotes don't affect credit ratings.
Although insurance companies check your credit during the quote process, they use a type of inquiry called a “soft request” that isn't presented to lenders. You can receive as many inquiries as you want without negative consequences for your credit rating. This is because the insurance company isn't looking at your real score; it's just using information from your credit report. While your car insurance policy will never affect your credit rating, the opposite can happen.
According to the National Association of Insurance Commissioners, 95% of auto insurance companies use what is called a credit-based insurance rating to calculate premiums in states where this practice is allowed. It's important to make timely payments on your car insurance policy, but not necessarily for reasons related to your credit rating. Auto insurance companies don't report their premium payments to credit bureaus, so your policy doesn't appear on your credit report. As a result, having good credit can help you when looking for a new insurance policy or when your insurance company renews your policy.
According to WalletHub, a car insurance rating is a rating that insurance companies use to predict if someone is likely to file a claim. Because insurance policies don't usually appear on credit reports, your credit rating will likely be safe from damage if your insurer doesn't send the account to collections. California, Hawaii and Massachusetts have laws that prevent insurers from using credit history to set insurance rates. Since getting multiple insurance quotes won't affect your credit rating, check several insurance companies to make sure you're getting the best rate.
Even in states where there are no such limitations, insurance companies generally do not use a credit-based insurance rating as the sole basis for increasing rates or for refusing, canceling, or refusing to renew a policy. Depending on the state and the insurer, some people can pay an average of 67 percent more in premiums for their car insurance than people with excellent credit. Once you apply for insurance coverage, you authorize the insurer to obtain your credit and other information it needs to calculate your premium. Auto insurance companies in most states use the applicant's credit score and credit history to calculate their premium.
Most auto insurance companies will look at your credit report and use your credit rating and credit history as a single factor when setting premiums.