Which insurance companies don't check credit score?

Why does your credit matter for car insurance?

Drivers with poor credit have been found more statistically likely to file claims and, therefore, are considered higher risk to insure. To compensate for potential claims, insurance companies generally charge drivers with a lower credit standing a higher premium. Ultimately, charging drivers a higher rate for having bad credit is a way for the insurance company to lower its own financial risk.

Because of this, in states where it is allowed, most car insurance companies consider your credit score when they provide a policy quote. During the quoting process, a licensed agent will gather basic information such as your full name, date of birth and physical address. This information is used by insurance companies to access consumer reports used to determine your credit-based insurance score, which is a rating factor used to calculate your rate. Fortunately for drivers, these checks are only soft credit inquiries and do not adversely affect your credit score like a hard credit check would.

What states do not allow credit checks for insurance?

Depending on where you live, insurance companies may be prohibited from using your credit history to determine your premium. There are currently three states that prohibit the use of credit history in auto insurance rating: 

• California
• Hawaii
• Massachusetts

In some other states, like Maryland, Michigan, Utah and Oregon, insurance companies cannot legally use your credit history as a basis for canceling an auto insurance policy or refusing to renew an existing policy. However, insurance companies in these states can still use your credit score to determine your premium, which is why having a good credit score may give you an advantage in finding cheaper rates. 

Attempts have been made at the national level to pass the Prohibit Auto Insurance Discrimination (PAID) Act, which would end the use of certain personal factors, including credit history, for premium calculation. However, this effort has been unsuccessful, and the decision remains at the state level. That said, states are constantly reviewing and revising their stance on the issue, so it is important to stay informed about any policy changes before shopping for quotes.

What insurance companies do not check credit scores?

Insurance companies technically use credit-based insurance scores, rather than traditional credit scores, in rating. These scores use many of the same inputs as credit scores but are not the same thing. There are a few companies that sell traditional auto insurance with no credit check, such as CURE, Dillo and Empower. However, these companies don’t sell no credit check car insurance nationwide and are only available in a select few states.

And, as mentioned earlier, if you live in California, Hawaii or Massachusetts, your insurance company can't use your credit history when determining your insurance rates. However, if you have poor credit and live in a state that allows insurance companies to check the factors that contribute to credit, you may want to consider one of the following performance-based insurance policies where credit may be weighed less heavily.

Other car insurance options

Usage-based insurance

If you go with a usage-based insurance company, your monthly premium is heavily based on the distance you drive, rather than a fixed annual or semi-annual rate. This is also called pay-per-mile insurance, and it can be a cheaper option for infrequent drivers. Because there is no fixed premium, some usage-based insurance companies, like Root and MetroMile, are less likely to consider your credit history. Traditional insurance companies are still generally going to consider credit, but low usage of your vehicle could outweigh any potential impacts of low credit. 

Here are some of usage-based insurance options you may consider:

• Root Insurance
• MetroMile
• Milewise from Allstate
• SmartMiles from Nationwide

When it comes to usage-based insurance, it may not be ideal for drivers who travel longer distances. Based on the pricing structure, it can actually be more expensive than traditional car insurance if you drive every day, such as on a regular commute to work or school.

Telematics insurance

If you’re concerned about getting costly car insurance quotes because of a poor credit score, another option to consider is telematics-based insurance. Although it would not circumvent a credit check in all scenarios, it may provide you more affordable rates if your driving habits are consistently safe. This type of car insurance uses a telematics device or mobile app to track your driving habits, like average speed and how fast you brake.

Rather than paying a flat monthly rate or a rate based on specific distance traveled, a telematics-based insurance premium is based on how safe (or unsafe) you drive. Even if you have a poor credit score, you could potentially make up for it by demonstrating safe skills behind the wheel.

Here are some of the telematics-based insurance programs:

• Progressive Snapshot
• State Farm Drive Safe and Save
• Farmers Signal
• Geico DriveEasy
• Allstate Drivewise
• Nationwide SmartRide

Frequently asked questions