Both auto insurance and homeowner insurance premiums are based on factors other than credit history. Your car insurance premiums are affected by your driving record, the type of car you drive, and where you live. Yes, your credit score affects how much you pay for your car insurance. For example, one insurance company might decide that a score of 750 or higher allows for the lowest car insurance rates, while another might require a score of 700 or more to receive the best price.
These policies still use factors such as location and age, but they also use driving behavior to determine your car insurance rate. Young adults, immigrants who have just arrived in the country, and anyone who doesn't have a credit history can especially benefit from comparing auto insurance rates. While using credit-based insurance scores to calculate rates is legal at the federal level, insurance companies generally cannot use credit history as the sole reason to increase rates or deny or cancel a policy. Because the risk of paying a claim is higher, auto insurance companies charge higher premiums to drivers with lower credit scores.
No, there's no strong credit attraction when you request an auto insurance quote, so comparing prices won't affect your credit rating. The North Carolina Department of Insurance states that insurance companies believe that credit history can be used to predict insurance claim filing activity. California, Hawaii, Massachusetts and Michigan prohibit or restrict the use of credit as a qualifying factor for auto insurance policies. When you're a new customer, most companies will review your score to help calculate car insurance rates.
There is also a lack of awareness about the use of credit-based insurance ratings to set insurance rates, and consumer advocates have rejected the use of credit information to set rates. Bankrate can help you understand why your credit history may affect your car insurance rates and what steps you can take to improve your credit situation and potentially lower your premium. However, you'll generally get a different score for each type of insurance, although some companies, such as LexisNexis, offer scores that can be used across multiple lines of insurance. While your credit score and credit-based insurance score aren't the same thing, your credit score can be a good indicator of your credit-based insurance score.
Some insurers will provide you with contact information to learn more about your score, especially if your car insurance rate was affected by your credit. Under North Carolina law, insurance companies licensed to sell home and auto insurance can use credit card scores to determine their insurance premiums.