Getting car insurance without having to worry about your credit being checked, may seem like the perfect option, especially if your credit score isn’t quite as high as you would like it to be. However, this isn’t always true. In fact, getting a car insurance policy without going through a credit check may actually end up costing you more. The only way to know with 100% certainty is to compare a no credit check car insurance quote with a similar standard policy quote that requires a credit check.
The History of Car Insurance and Credit Checks
In the 1990s, car insurance companies began checking credit ratings before giving an auto insurance quote. However, the credit score used by insurance companies isn’t exactly the same as your FICO score. While your insurance credit score does use the information found in your FICO credit report, it examines other factors and may weigh them differently. As a result, your insurance credit score may be substantially lower or higher than your FICO score.
You can use Credit Karma to check your insurance credit score for free.
How do You Know if your Credit Report will be Checked?
The answer to this question is simple. If the prospective insurance company asks for your Social Security number, it is almost guaranteed that they plan to run your credit history. If they do not ask for your Social Security number, you can be sure you are in the clear. This is because your Social Security number is required to run a credit check.
If Your Car Insurance Credit Score is Low
Unfortunately, most insurance companies do look at your credit before offering a policy. Those that skip this step tend to increase their insurance premiums in an attempt to compensate for the “higher risk” they are taking from not knowing your credit history. This is why it is so important to check your insurance credit score before, just assuming that your score is bad. You may be worried about nothing. However, if you find that your insurance credit score is a tad on the low side, there are a few things you can do that may significantly reduce your car insurance premium.
- Be aware that California, Hawaii, and Massachusetts do not allow your credit score to have any effect on your car insurance premium. All three states have laws forbidding insurance companies from accessing their customers’ credit reports. If you live in one of the other 47 states, you can expect to pay more on average for your car insurance than drivers with a comparable driving record, but excellent credit history.
- Look for companies with a history of offering fair prices to drivers with a low credit score. Some car insurance companies understand that everyone doesn’t always have perfect credit. Progressive is a great example of an insurance company that tends to be slightly less expensive than its competitors’ policies.
- Consider the state you live in. As mentioned above, Progressive Insurance was found to offer the best prices on car insurance for drivers with poor credit scores. However, in the same study conducted by Consumer Reports, it was determined that this may not be the case depending on the state you live in. For example, in Illinois, Farmers offered the best deal, while American Family had the lowest prices in Oregon. In other words, compare policies between different providers in your state before committing to an insurance policy.
- Opt for a nonstandard auto insurance policy. There are a few insurance companies that specialize in nonstandard auto insurance policies, or policies intended for high-risk drivers. Most companies will also extend these offers to drivers with poor credit scores. A few of the companies that offer nonstandard policies include:
- Direct General
- United Auto
Keep in mind that all of these companies may not offer coverage in your state. You will need to contact them to learn if coverage is able where you live.
- Ask potential insurance companies about a usage-based insurance policy. Telematics is the latest in insurance technology and allows companies to offer usage-based policies. To get this discount you must have a telematics device installed in your car. You also install an app on your smartphone. The device will track how, where, and how much drive. The information is reported to the insurance company and to you through the app. This allows very cheap car insurance no deposit to come up with quotes based on your actual driving habits, instead of factors that have nothing to do with your driving skills, such as bad credit.
Finding a usage-based policy is much easier than you might think. Major insurance companies, such as Allstate, Progressive, and State Farm, offer these types of policies, along with their standard policies. As an added bonus, you may get a small discount simply for signing up. When it is time to renew your policy, you may see an additional decrease, depending on your most recent driving habits.
Root Auto Insurance is also an option. This newer company sells only usage-based policies. Before getting a policy, you will need to complete a test drive through the company’s app. The information collected during your test drive will be used to help determine your quote. Although your test drive is the largest factor when it comes to devising a quote, Root Insurance may also look at your credit history.
Finding a No Credit Check Insurance Company
If you still aren’t convinced that checking your credit score may not affect your insurance premium, you always have the option of using a no credit check insurance company. Keep in mind, though, that these policies tend to be more expensive, yet they don’t offer any more coverage than you will receive from a standard insurance company. On the other hand, it never hurts to get a free quote, allowing you to compare it to your quotes from the companies requiring a credit check.
A Few Final Thoughts
It may be difficult to find an insurance company that doesn’t require a credit check, but it can be done. However, it is important that you get several quotes before choosing a company. Compare the quotes and what they cover, carefully, to make certain you are getting the best rate available.