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Does Credit Score Affect Car Insurance Rates?

The Most Surprising Way to Save Money on Your Car Insurance

YouTube video
Watch the video above to see if your credit score affects your car insurance rates.

There are many factors that go into determining the rate of your car insurance including your age, gender, driving record, and the type of care you drive; but the most surprising factor is your credit score. Yes, you read that right- your credit score!

Now, technically speaking, the score that insurance companies use is a little different from a traditional credit score, nonetheless, it still factors in many of the same characteristics such as a person’s payment history, current debt, length of credit history, and types of credit.

You might be thinking, “What does credit have to do with how I drive?”

Just like lenders use traditional credit scores to determine whether someone will repay a loan or make payments on time, a credit-based insurance score has been shown to accurately predict the likelihood of someone filing a claim. And those with higher credit scores are statistically less likely to be involved in a car accident and cost insurance companies less than those with lower scores. 

Each insurer and rating agency uses a unique formula to calculate insurance scores, therefore you won’t have the same score with every company. However, virtually all companies take into account credit scores to some capacity.

There are a few states, like Massachusetts and California, that have passed legislation to prohibit insurance firms from making use of credit ratings. But for the time being, the majority of us are impacted by credit.

Now that you are armed with this information, how can you use it to get a better deal on your auto insurance?

  1. If you have a good credit score, congratulations! According to Nationwide Insurance, about half of their policyholders receive a discount on their premiums because of their good credit scores.
  2. If you have been with the same insurance company for a long time, you may have a better credit score now than when you started the policy. Ask your agent to request that your credit-based insurance score be reevaluated; you might be amazed at how much your premium decreases as a result.

If your credit score isn’t the strongest- don’t worry. There are some insurance providers that specialize in covering drivers with poor credit at far more reasonable rates than those offered by competitors. Because of this, you may be able to find lower rates by comparing the cost of coverage from multiple insurers in your area. There are also some excellent educational materials available online that may teach you how to raise your credit score and get a better auto quote.

Don’t worry if all this information sounds like a lot to you. That is what having a trusted independent agent is for! We shop insurance carriers for you to determine the best rates and coverages based on your individual circumstances and needs. Click here to start your free auto insurance quote today!

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