Can You Get Car Insurance With No Credit History?

Your credit history is a record of how you handle debt. If you don’t have credit history, you probably haven’t made any purchases using credit. Perhaps you pay for major purchases in cash, you didn’t take out a car loan or you don’t have a credit card.

You’re considered credit invisible if you don’t have credit reports with the three major credit bureaus — Experian, TransUnion and Equifax. They collect information about your credit ratings, and that information becomes available to financial institutions.

It’s possible to have a credit report but no credit score. A credit score is a numerical rating that represents your perceived ability to honor your financial obligations. It analyzes your credit history and current financial responsibilities. Having a credit report with no score can happen when you haven’t borrowed money or made debt payments in the last six months.

What Is a Credit Score?

Your credit score is calculated from the information on your credit report, and it indicates how likely you are to make payments on time. Most providers use the FICO credit-scoring model, which ranges from 300 to 850. A poor credit score falls in the range of 300 to 579. Insurers classify people with low credit scores as high-risk drivers because they’re more likely to file claims.

Depending on the state you live in, auto insurance companies could use your credit score to determine whether to give you coverage and what rates to charge you for it. Insurance underwriters calculate the risk of being your provider. To help assess this risk, they use your credit report to learn:

• How much debt you have
• What types of loans you’ve taken out
• Your history of repaying debt
• How long you’ve had a loan or line of credit

However, if you have no credit history, the insurer won’t be able to gather any of this information. While providers likely won’t decline to insure you because of it, your insurance costs will typically be higher.

Once you get insured, your provider doesn’t report your payments to the credit bureaus. Since the payments don’t appear on your credit report, they don’t affect your credit. But your credit could suffer if you stop making payments and the debt is sent to collections.

Your provider might also cancel your insurance policy because of unpaid premiums. This could cause a lapse in coverage. This won’t affect your credit score, but it will likely cause you to have higher premiums in the future.

Do Past Claims Hurt Your Credit Score?

An insurance claim is the request you make to your provider to pay for something your policy covers. Filing an insurance claim won’t affect your credit. Examples of auto claims include:

• Car accident
• Damage caused by another car
• Damage caused by a natural disaster
• Theft
• Property damage caused by your car
• Injury caused by your car
• Death caused by your car

While your claims history doesn’t affect your credit score, filing claims generally leads to increases in your car insurance premium. Car insurance companies may check on auto claims from the last three to five years. If you’ve filed several claims in a short period of time, insurers figure you’re likely to do it again.

Can Insurers Check Drivers’ Credit in Your State?

Most states allow insurance companies to consider your credit score and history to help determine your premium. But some have laws to protect against this, so you might not have to worry about a credit check. Here are the states where using credit scores to set auto insurance rates is banned:

• California
• Hawaii
• Massachusetts
• Michigan

Maryland lets auto insurers use credit history to set rates on new policies. But it doesn’t allow companies to use your credit as a reason to deny or cancel coverage, deny policy renewal or raise your premium when you renew.

You’re still able to get car insurance if you have no credit, but your premium will likely be higher. Aside from having excellent credit, there are other ways to get good insurance coverage with affordable rates.

If you’re a safe driver with a good driving history, enrolling in a telematics insurance program could reduce your premium. Telematics programs use mobile apps or plug-in devices for your car to collect data about your mileage and driving habits. They reward safe drivers with lower premiums, and some raise rates for bad drivers.

Most providers analyze the following driving behaviors:

• Phone use while driving
• Time of day you drive
• Mileage
• Acceleration
• Hard braking

After a set period of time, the provider determines your new rate. However, telematics insurance isn’t for everyone. You may not want to enroll if you’re an unsafe driver or drive a lot during rush hour or late at night.

If you’re starting from scratch, building credit takes time. Once you open an account, it can take six months or more to get a credit score.

Here are some ways to build your credit:

• Open a credit card
• Make on-time payments
• Become an authorized user on another person’s credit card

If you open a credit card, it’s important to make payments on time and keep your balance low. Your payment history is the biggest factor in your score, and it can be the difference between good credit and bad credit.

When going the route of becoming an authorized user on someone else’s credit card, make sure you’re choosing wisely. Their payment history for the card will reflect on your credit score. While there are benefits to this, it can also cause a negative impact if you or the primary user miss payments.

Even without credit history, you have options for getting car insurance. And once you have coverage, building your credit can help you get the best car insurance rates when you renew your policy.

Top Auto Insurance Recommendations

If you have no credit history, you could benefit from one of the following insurance companies. It’s best to compare car insurance quotes from several companies to get the best rate.

Travelers: Best for Most Drivers

High-risk drivers may find flexible coverage and lower rates Travelers. People with accidents, speeding tickets or recent DUIs on their driving records often pay less with Travelers than they do with other insurers. If you’re a safe driver, you could save even more with its telematics program, IntelliDrive^Ⓡ.

Read more: Travelers insurance review

State Farm: Best Customer Experience

Policyholders with good driving habits can save money through State Farm’s telematics program, Drive Safe & Save™, or its good driving discount. Drivers could also be eligible for other savings, like its accident-free, multi-policy and multi-car discounts.

Read more: State Farm insurance review

Because consumers rely on us to provide objective and accurate information, we created a comprehensive rating system to formulate our rankings of the best car insurance companies. We collected data on dozens of auto insurance providers to grade the companies on a wide range of ranking factors. The end result was an overall rating for each provider, with the insurers that scored the most points topping the list.

Here are the factors our ratings take into account:

• Cost: Auto insurance rate estimates generated by Quadrant Information Services and discount opportunities were both taken into consideration.
• Coverage: Companies that offer a variety of choices for insurance coverage are more likely to meet consumer needs.
• Reputation and experience: Our research team considered market share, ratings from industry experts and years in business when giving this score.
• Availability: Auto insurance companies with greater state availability and few eligibility requirements scored highest in this category.
• Customer experience: This score is based on volume of complaints reported by the NAIC and customer satisfaction ratings reported by J.D. Power. We also considered the responsiveness, friendliness and helpfulness of each insurance company’s customer service team based on our own shopper analysis.

Our credentials:

• 800 hours researched
• 45 companies reviewed
• 8,500+ consumers surveyed

*Data accurate at time of publication.