How Your Credit Impacts Your Insurance Premium

You’ve never been in an accident, but every time you get a quote from a car insurance company, it seems high. What’s the deal with that? There are many factors involved in determining insurance rates, but at some point, we all ask ourselves, “Does credit score affect car insurance?” Many consumers do not realize to what extent your credit can impact the cost of your auto insurance.

Do Insurance Companies in Your State Check Credit?

Not every state allows the use of credit to be a determining factor in insurance prices, but of the states that do allow it, it’s likely your score will be checked. FICO reported 95 percent of auto insurers to look at credit-based insurance scores, also known as your auto insurance score. But before you wonder what your insurance credit looks like, check and see if your state allows this kind of report by visiting your state’s insurance department website. By viewing your state’s requirements, you can find out whether or not no credit card check insurance is available statewide.

does credit score affect car insurance

“Wait…is a credit score and credit-based insurance score different?”

While both scores refer to your spending habits and how you use your line of credit, they are different. A credit-based insurance score delves into your credit history to predict how likely you are to experience an insurance loss, such as an injury or damage to a vehicle caused by a collision.

Factors include:

  • Payment history
  • Debt
  • How long you’ve had your line of credit
  • The type of credit you have (cards, loans, etc.)

While it may feel mysterious, insurers cannot use random factors to determine insurance premiums—they must be supported by research. And research has shown that there is a connection between your auto insurance score and how much risk you carry.

“I just got my auto insurance credit score…is it good?”

What is a good auto insurance score anyway? Much like your normal credit score, a score of 700 or more is generally considered good. Your number can range anywhere from 300 to 900. If you find yourself in the group of people with scores above 800, congrats! You carry little risk. For the rest of us, there are still affordable insurance options.

You can improve your score.

Insurance companies (SafeAuto included) use a variety of factors to determine your premium, so your credit score won’t be the only piece of the puzzle. So, if you’re worried about your car insurance, bad credit might not prevent you from finding the coverage you need! That’s why when you get a quote at SafeAuto.com, we ask you questions about your location, gender, age, and more. If you’re looking for ways to improve your credit there are a few simple actions you can take, such as:

  • Paying all your bills on time
  • Minimizing the balance on your credit card
  • Checking your credit report and disputing any issues
  • Managing the number of credit cards you have

Remember, if you have bad credit, car insurance is not out of reach!

“My credit isn’t great – can I still get car insurance?”

Good news. Bad credit car insurance exists! Car insurance is a legal requirement, and as such, we believe everyone should have access to auto insurance they can afford. That’s why we offer low minimum down payments and payment options. Imperfect credit shouldn’t stop you from driving. That’s why SafeAuto is insurance for the rest of us.