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When looking for the best car insurance quote, it may come as a surprise to you when auto insurers request permission to check your credit history. Some car insurance companies use a credit-based score (called an insurance score) when determining your car insurance premiums.
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Many insurers use an insurance credit score, based on a driver's credit history, to underwrite policies and set rates.
The cheapest insurer we found for drivers with good credit is Metromile, with average premiums of $99 per month.
Drivers with good credit will see lower insurance rates than those with bad credit.
Does good credit lower your car insurance premiums?
It might come as a surprise, but having good credit can get you a better deal on car insurance. Although it’s not legal in every state, many insurers use your credit score when calculating your insurance premiums.
If you're like most people, when you think of good credit, you think of your credit report as it applies to lenders, like when you apply for credit cards. Lenders use your credit score to determine how likely you are to repay a debt. Companies use your credit score to decipher how likely it is you will file a claim. Here are the best quotes for drivers with good credit.
Disclaimer: Table data sourced from real-time quotes from Insurify's 50-plus partner insurance providers. Actual quotes may vary based on the policy buyer's unique driver profile.
Insurance Credit Scores
An insurance risk score, also called an insurance credit score, is a system used mostly for homeowners and auto insurance providers. It is a point system used by underwriters to determine insurance costs, predict risks, and find the probability of filing claims in order to aid them in deciding rates.
According to the Insurance Information Institute, actuarial studies reveal that how you manage your finances indicates your probability of filing an insurance claim. Auto insurers need to assess risk, which is the uncertainty or chance of a loss. The more likely you are to file a claim, the higher your premiums will be.
Most states use your insurance credit score for property and casualty insurance. Other types of insurance may use it as a rating factor, but it's not as prevalent. Some states have banned the use of your credit report for determining auto insurance premiums. These states include California, Hawaii, Massachusetts, Washington, and Michigan.
40 percent of your credit insurance score is determined by your payment history. As with your credit score, how often and how punctually you have paid toward your outstanding debts is a primary factor in your insurance credit score.
30 percent of your score is based on the amount of debt you have at the time of your insurance application.
15 percent of your score is determined by how long you have had lines of credit. This pertains to all types of credit, including small business loans and your mortgage.
New Credit Applications
10 percent of your score accounts for the pursuit of new credit. Applying for a new line of credit is usually a hard inquiry. A hard inquiry is when a lender requests your credit report from the three major credit bureaus, Experian, Transunion, and Equifax.
Variety of Credit
5 percent of your credit score comes from the types of credit you have. This includes mortgage and auto loans, credit cards, and business loans.
As you can see, your credit score and insurance credit score use some of the same data but have different criteria. The main differences are the percentages used for each factor and credit utilization. Insurance credit scores measure how much you owe to a creditor but do not focus on the ratio of how much is being lent to your use of credit.
Your Insurance Credit Score and Other Auto Insurance Pricing Factors
Your credit score affects your car insurance rate, but it is not the bottom line. Insurers may ask for personal information, such as your age, gender, and place of residence. They also consider your driving record, claims history, and information about your car, like make, model, and mileage. The type of coverage and your coverage limits are also a factor in your premiums.
Insurance Credit Score Providers
From the moment you start making a dent in the national debt, you have a right to a free annual credit report from the three nationwide credit reporting agencies. Unlike your credit score, your insurance credit score isn't as easy to obtain. The three major insurance credit score providers are FICO, LexisNexis, and TransUnion.
LexisNexis is the only provider you may obtain your score through, and this could result in a hard inquiry and may affect your insurance credit score. If you don't want to risk hurting your score, you may ask your car insurer if they use your insurance credit score in their underwriting and request it.
Insurance credit score providers use a numerical rating system to assign your insurance credit score. These companies use their data to determine the loss ratio of homeowners and auto insurance applicants. Loss ratio is a formula used to compare the income from your insurance premiums to possible losses.
Best Discounts for Drivers with Good Credit
Auto insurance companies have a variety of discounts for different circumstances. Insurers may offer discounts for bundling your policy (for example, insuring your car and your home), safe driving discounts, good student discounts, and more. The following companies offer some of the best discounts for drivers with good credit.
Founded in Virginia in 2009, Elephant can save you up to 40 percent on your insurance. It offers discounts on car insurance for bundling your policy, multi-car discounts, student discounts, safe driving, and paperless accounts.
Travelers insurance has been in the business for over 165 years and is renowned for its property and casualty insurance. It offers safe driver, multi-policy, new car, electric car discounts, and more.
With Progressive, drivers with good credit save over $700 on average. Progressive offers multi-policy and multi-car discounts, continuous insurance, safe driver, paperless discounts, and more.
Mercury offers quality insurance and affordable coverage. You can receive accident/violation discounts, good student, multi-policy auto-pay discounts, and more.
Freedom National has been offering affordable auto insurance since 1999. Its discounts on car insurance include good driver, multiple vehicles, paid in full, senior driver discounts, and more.
Tips for Cheaper Car Insurance with Good Credit
Take Advantage of All the Discounts Offered by Your Insurer
Many companies offer a variety of car insurance discounts, and not just for safe driving. Discounts may include having a paperless policy, multiple vehicles, bundling your policy, and more.
Choose a Higher Deductible
A deductible is the out-of-pocket money you pay if and when you get into an accident. If you are a safe driver you may never or rarely get into an accident. A higher deductible will lower your premium.
Shop Around for Car Insurance
If you are a driver with a car, having car insurance isn’t optional. With so many auto insurance companies, finding the right policy at the right price is just a matter of time. With a little effort, you can check all the boxes to find the appropriate coverage at a price that suits your budget and with all the features you desire or require. You can do it for free on Insurify.
The Best Way to Compare and Get Cheaper Car Insurance
Like the latest fashion, there's always a way to get it at a cheaper price. Using Insurify to compare insurance quotes and learn about the best providers and their discounts, you’ve got a leg up. In a competitive market, by equipping yourself with knowledge of the industry and auto insurance companies, you're cruising in a market full of pitfalls that you can avoid.
Frequently Asked Questions
What is considered a good credit score for car insurance?
Insurance credit score providers use the same criteria on your credit report to determine your score. However, their score ranges differ. Typically, a score of 700 or above is considered a good insurance credit score.
Why do insurance companies ask for my credit score?
Actuarial studies have shown that there is a link between your credit score and the probability of filing claims. Insurance credit providers have devised criteria for evaluating your credit score to predict the probability of applicants filing claims. The higher your score, the less likely you are to file claims.
Can I get discounts on car insurance for having a good credit score?
Auto insurers may offer a variety of discounts for safe driving and more. Primarily, the better your insurance credit score is, the less your premiums will be.
How do I get cheaper car insurance with good credit?
There are a variety of factors that determine your auto insurance premium rates. By having a good insurance credit score, you are likely to pay more affordable rates. Take advantage of what your insurer may have to offer for having a good credit score. Unlock good credit discounts easily when you compare quotes on Insurify.
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Data scientists at Insurify analyzed more than 40 million real-time auto insurance rates from our partner providers across the United States to compile the car insurance quotes, statistics, and data visualizations displayed on this page. The car insurance data includes coverage analysis and details on drivers' vehicles, driving records, and demographic information. Quotes for Allstate, Farmers, GEICO, State Farm, and USAA are estimates based on Quadrant Information Service's database of auto insurance rates. With these insights, Insurify is able to offer drivers insight into how companies price their car insurance premiums.
Aissa Martell is a licensed insurance producer in the State of New York. She is a creative writer and has been freelance writing for five years. She’s happy to share her knowledge of the insurance industry and its products.