How credit scores affect car insurance – Nationwide (2024)

FAQs

How credit scores affect car insurance – Nationwide? ›

Four states — California, Hawaii, Massachusetts and Michigan — ban companies from using your credit report to determine insurance rates. Instead, companies in these states base rates on your driving record, location and other characteristics. You may also pay more for insurance if you don't have a credit history.

Insurance companies often view a lower car insurance credit score as an indicator of increased risk, which may lead to higher premiums for those with less favorable credit histories. This approach reflects the insurance industry's use of credit-based scores to gauge potential claim risks.

Most insurance companies using credit information will include it as a factor in determining your rate. For example, someone with a relatively high credit score may pay a lower premium than someone with a relatively low credit score.

Key Things to Know About How State Farm Uses Your Credit Score. State Farm will assign you an auto insurance score, which is based on your credit history, just like your credit score. This auto insurance score could vary from one insurer to another since insurers may take different things into account.

In fact, you have many credit scores. There are three nationwide credit reporting agencies (CRAs) — Equifax^®, Experian^® and TransUnion^®.

The cost of car insurance is affected by factors including your age, gender, location and marital status; the vehicle you drive; your annual mileage; your driving record; your claims history and even your credit score.

Most negative items remain on your credit report for seven years. Bankruptcies may remain on your credit report for up to ten years, although many creditors stop reporting Chapter 13 bankruptcies after seven years. The good news is that credit scoring gives greater weight to more recent activity.

Insurance scores using the LexisNexis Risk Classifier range from 200 to 997. According to the company, a score of 770 or better is considered good and will get you favorable rates. A score of 500 or below is considered poor and could result in higher premiums or being turned down for coverage.

Which insurance companies don't use credit scores? All major car insurance companies — including GEICO, Progressive and State Farm — do a credit check during the quoting process. In fact, credit is one of the major rating factors used by underwriters when determining car insurance rates.

Our use of credit information enables us to offer lower premiums to more customers and allows us to cover more drivers and homeowners. ► What you can do: Check your credit reports for accuracy and talk to your Allstate Agent for ways to lower your costs. car insurance costs.

Does Nationwide insurance check your credit? ›

Nationwide uses a credit-based insurance score when determining premiums. Studies show that using this score helps us better predict insurance losses. In fact, 92% of all insurers now consider credit when calculating auto insurance premiums.

Membership in the 800+ credit score club is quite exclusive, with fewer than 1 in 6 people boasting a score that high, according to WalletHub data.

According to a report by FICO, only 23% of the scorable population has a credit score of 800 or above.

Your credit score is one of the biggest factors in determining the rate you'll get, because lenders use it to gauge how likely you are to repay the loan. Generally speaking, the higher your credit score, the lower your car loan interest rate is likely to be.

On the pro side, it can be a reflection of the responsibility and stability of an individual, which are factors correlated with low-risk behaviors and thus can lead to lower premiums. However, the con is that it may penalize those with low credit scores due to reasons not connected with their insurability.

For example, if your FICO score is below 580 and you live in a state where credit use is restricted, you'll pay approximately 15% more in premiums than someone with a FICO score between 740 and 799.

Although ranges vary depending on the credit scoring model, generally credit scores from 580 to 669 are considered fair; 670 to 739 are considered good; 740 to 799 are considered very good; and 800 and up are considered excellent.