Symbol of no credit

Car Insurance Quotes with No Credit Check

Currently, there are only three states that don’t allow insurance companies to use a driver’s credit score as a rating factor to determine premiums. So unless you live in California, Hawaii, or Massachusetts, your credit rating can be factored into the cost of your coverage.

In short, insurance companies have been using credit as a factor for rates for over two decades. Because they feel it’s a reliable metric by which to assess liability, they will likely continue to do so as long as legislation doesn’t interfere.

In other words, poor credit can not only affect your rates - insurers may even deny coverage based on it. Consumers with low credit ratings may end up paying more for their insurance policy. You may have difficulty finding an affordable carrier who will insure you. Although insurers may be allowed to use this information at the time a motorist purchases a policy, it is not necessary to have your credit checked when obtaining quotes.

Why your credit rating affects your car insurance policy

So how are your credit score and insurance rates related in the first place? There are a couple of reasons.

The first one is simple. If you are on a month-to-month payment plan, then your insurer is basically giving you a loan for the policy premium. And they are charging you a bit of interest as well. How much interest they charge is dependent on your credit score, just like any other loan.

The second line of reasoning is a little more complicated. Since insurance companies can’t predict the future, they use statistics to determine the likelihood of insurance claims for everyone who applies for a policy. Some of these are no-brainers—people with a spotty driving history are more likely to have an accident. Less obvious but still logical is the location. Living in the city means more traffic, more accidents, and more insurance claims.

In the 1990s, some companies were using statistics about credit ratings to develop a new method to predict risk factors. By around 1998, most companies were using credit history to create insurance scores. And studies have shown them to be effective, as well. Of course, these models have become so complicated that they are hard to comprehend. Some people worry that if regulators can’t understand them, they may be using illegal means to evaluate consumers.

Other factors that determine rates

Consumers should be aware that credit history is only one factor that is used by insurers to determine premiums and issuance or denial of a policy. Many states prohibit carriers from denying coverage, raising rates, or canceling policies at the time of renewal based solely on a motorist’s credit scores. Other rating factors commonly used to rate drivers include an individual’s driving record, age, gender, marital status, place of residence, and the type of vehicle to be insured. Factors that cannot be used include race, ethnicity, religion, and income - although low income and poor credit often go hand in hand.

Finding affordable options

Ultimately, insurance companies depend on the payment they get from low-risk drivers to offset the cost of claims for high-risk drivers. That’s why they offer so many discounts to counterbalance all these factors. So if your credit is in bad shape, find out what your options are. Defensive driving, low-mileage discounts, safe driving discounts—take advantage of anything you can improve your rates.

Not every company will use your credit to determine your rates. If you have bad credit, shopping around can help you find an affordable company with the options you need. Driving uninsured or underinsured is never worth it. Take the time to check all of the options in your area.

If you simply can’t find coverage because of your score, you can consider usage-based car insurance. These policies use telematics to check out your driving habits and will assign the cost based on these. They still offer the same standard coverages as other insurance companies, but will often be cheaper for good drivers with bad credit. They can also be a good option for inexperienced drivers signing up for their first insurance policy.

Compare No Credit Check Car Insurance Quotes

With the majority of states allowing carriers to use insurance scores to rate motorists, chances are the cost of auto insurance coverage will be affected by your financial history. Comparing the rates of several companies is the most effective way to find the lowest premium for automobile coverage.

With that in mind, you may feel uncomfortable giving out your social security number to every carrier you compare. Even though the credit pulls won’t affect your rating, you’re still putting your personal information out there. There’s no need to have your credit checked to every time you want to compare quotes. Many insurers will provide a quote without your social security number or driver’s license number.

Consumers who choose to shop for policies without providing a social security number will likely be asked by the insurer to describe their credit situation as poor, average, good, or excellent. You’ll also need to answer questions about any speeding tickets or accidents on your driving record. It is important to answer both as accurately as possible. If you provided inaccurate information, your quote can be affected quite a bit.

The bottom line

When obtaining quotes to compare, consumers should ask whether or not the companies quoting them will be using their credit history as an underwriting or rating factor. If so, ask how it will be used. Sometimes it will only affect your month to month payment, and you can save money by paying your entire premium upfront. It may affect eligibility for certain policies and the cost of premiums. You should also learn about the insurance company’s cancelation policies to see if they might cancel your policy within the first 60 days.

Knowing the answers to these questions can help motorists understand why they are being charged a higher price or why they have been denied coverage. Many states require that insurers give specific reasons why the best rate was not offered or if a policy was not issued.