Can Bad Credit Affect Your Auto Insurance Rate?

And will getting a quote affect your score?

If you're shopping for a new auto insurance policy, you might wonder if the insurance company will check your credit. Or, you may question if a bad credit score will affect the insurance premiums you have to pay each month. There are insurers that might run your credit score but this can vary depending on the province you live in. Because they have specific rules about auto insurance, here's what you need to know.

Will My Credit Score Affect My Insurance Rate in My Province?

A person's credit score can affect a lot of the loans they are eligible for. These can range from a new mortgage loan to applying for a credit card or buying a new car. And, just like auto insurance rates vary, so do credit scores. Credit scores start at 300 (poor credit) and go up to 900 (excellent credit). Acceptable credit scores for credit reporting agencies like Equifax and TransUnion might be about 650.

Sometimes an insurer will run your credit report and this might affect the rates you're offered. They might assume that a person with good credit and a solid financial history is more responsible.

Similarly, a person that has bad or poor credit might not have a good financial history. And, there's speculation about people with bad or poor credit will they file more accident claims. Some statistics suggest this to be true, making the person a higher risk to insurers.

Will a Credit Check Affect My Credit Score?

If you're shopping online for insurance, an auto insurance company might run your credit. But, their check for your credit score won't affect your score. Here's why:

Soft Searches

When an auto insurance company or lender runs your credit for a preliminary credit check, it won't affect your score. These are considered "soft" searches meaning, they're checking the score and/or report for reference purposes only not because you're applying for credit.

Hard Searches

A "hard" search, on the other hand, is if you apply for credit and a lender looks at your score to determine your creditworthiness. In this case, they want a full credit report and/or score. This can affect your score.


What are the Rules About Credit Reports and Auto Insurance in My Province?

Every province is different when it comes to running credit reports and using the data to determine auto insurance rates.

Alberta

Insurance companies have to get the consent of the person before running their credit report. The person can decline to let them run their credit.

British Columbia, Manitoba

Credit scores aren't a factor here and there are no rules on credit scores. Insurance is regulated by the individual province.

Nova Scotia, Saskatchewan

An insurance company can look at your credit report and credit history when determining your rates.

Ontario, Newfoundland and Labrador

It's not legal for an insurer to use credit scores when setting up rates. However, they will use any criminal convictions related to driving and accidents when underwriting your new policy.

How Will I Know if My Insurer is Using My Credit Score?

The best way to find out if your auto insurance company is using your score is to ask them:

  • If you're currently shopping for new auto insurance, ask if your credit score will be a factor. You can always skip the auto insurance companies that use credit scores and shop with the ones that don't.
  • If you already have auto insurance and you're concerned that your insurance premiums are high, call and ask an insurance agent if poor credit is affecting your rates. If that's the case, then consider shopping online for auto insurance. Not every insurance company will use your credit score in determining auto insurance rates.

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What's the Average Insurance Rate in My Province?

If you're looking for auto insurance, you'll find that auto insurance rates vary from one province to the next. Factors can include the number of claims and accidents in that particular area.

Province or Territory and the Average Auto Insurance Rate:

Is There a Range the Insurance Company Might Use for Good Credit?

There isn't a specific credit score that determines auto insurance rates but it's more like a range.

Credit score ranges include:

  • Credit scores from 740 and up are considered excellent credit
  • Credit scores from 680 to 739 are considered good credit
  • Credit scores from 620 to 679 are considered fair credit
  • Credit scores from 550 to 619 are considered poor credit
  • Credit scores from 300 to 549 are considered bad credit

Finding the Best Auto Insurance Rates

Because some provinces can use credit history when determining auto insurance rates, if you have poor or bad credit, it can benefit you to shop online for auto insurance. Not every insurer will run a credit report which means you might be able to find a lower rate. If you're looking for new insurance or currently have auto insurance, ask the agent if your credit score will affect your premiums. Then check online for a cheaper auto insurance rate at Kanetix.ca.

With Kanetix.ca, you can compare insurance from over 50 of the leading insurance providers in Canada and you might save on average $427. Compare car insurance quotes today.

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