Jessica Sautter has a Bachelor’s Degree from Eastern Michigan University in Elementary Education with a Major in Reading and a Minor in Mathematics.

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Natasha McLachlan is a writer who currently lives in Southern California. She is an alumna of California College of the Arts, where she obtained her B.A. in Writing and Literature. Her current work revolves around auto insurance guides and informational articles. She truly enjoys helping others learn more about everyday, practical matters through her work.

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Reviewed by Natasha McLachlan
Content Writer

UPDATED: Oct 1, 2020

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Many people are concerned about shopping around for car insurance because they hear that the car insurance companies will check their credit report. They fear that it will affect their credit score when the reports are checked. Let’s discuss this topic elaborately, so you understand what’s going on inside.

Hard Inquiry vs. Soft Inquiry:

Credit Report Plays a Vital Role in Getting Insurance

Credit scores are an important number, and it seems that just about anything that a person does will affect it. However, it’s important to note that there are hard inquiries and soft inquiries on a credit report.

A hard inquiry is when a person is seeking credit. In the case of auto insurance, the person isn’t looking to gain credit. They are simply seeking to get the lowest possible rates on their car insurance.

Thankfully, the credit check for auto insurance is considered a soft inquiry. This makes the inquiry “Non-voluntary” which means that the person isn’t seeking to gain credit, they are simply seeking to check for lower rates.

Related: Fix Bad Credit Score Fast.

Soft inquiries on the credit report will not affect the credit score. So why then do auto insurance companies check credit scores?

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Reasons Auto Insurers Check Credit History:

One reason that car insurance companies check credit scores is to see how credit worthy the person is, this number is also used to consider risk assessment. A risk assessment tells the company that the person is a low risk or a high risk to insure.

This is the main reason that the companies are checking the credit score. A person that is a high credit risk may also carry this over into their driving habits. They may pay their bills late, and they may be less attentive when driving.

The people with poor credit record can still apply for no credit check insurance here.

These soft inquiries are not shown to personal lenders or anyone else. They are simply a way for the insurance company to assess the risk factors of insuring someone. The higher the credit score, the lower the risk factor.