The good news is that in states that allow your credit score to be used to determine eligibility for auto insurance, it typically can't be the sole reason for coverage denial. However, your credit score can influence your insurance costs. But what does your credit score have to do with insurance?
Your Credit Score and Insurance Coverage
An insurance company may deny your request for coverage for many different reasons. If you have too many speeding tickets, for example, you may be considered high risk for filing a claim. Your age and marital status can have a say, too, since statistically, a married 40-year old may be a less risky driver than a single 18-year old. Insurance companies can even use the age and condition of your vehicle to determine your rates.
However, if you’re denied coverage, it’s typically for multiple reasons. When it comes to making payments and filing a claim, some insurance companies may also care about your credit history.
According to Experian, your credit-based insurance score is based on your credit reports and used to determine how likely you are to file a claim. However, even if you live in a state that allows insurance companies to use credit scores in determining insurance costs, state insurance regulators typically don’t allow providers to deny a borrower coverage solely based on a poor credit score.
During the underwriting process, when the insurance company determines your potential rates and depending on your home state, an insurance company may use your credit score to determine your eligibility for coverage. For many insurance companies, poor payment history on your credit reports could represent a higher risk for your filing a claim or missing an insurance payment in the future.
What States Don’t Use Your Credit Score?
States vary in their insurance regulations. Here are the states that don’t allow your credit score to influence your auto insurance coverage, according to Experian:
- Michigan
- Massachusetts
- California
- Oregon*
- Utah**
*While your credit score can’t be used as a reason to deny or renew an insurance policy, they can still use your credit score in part to determine your rates.
**Can use your credit score to determine your rates, but it can’t be the only factor during the underwriting process.
If you’re looking for insurance for your next vehicle, check out our resource center to compare insurance rates.
On the Hunt for an Auto Loan With Poor Credit?
Insurance companies may be able to charge you more if your credit score is poor, and auto lenders can deny a car loan if your credit score doesn’t meet their requirements. If you’re in need of an auto loan with poor credit, then we want to help!
Auto Credit Express has created a nationwide network of special finance dealerships that assist borrowers with credit challenges. Fill out our free auto loan request form and we’ll use our network to look for a dealer in your local area.
