How your credit score influences your car insurance rate

How your credit score influences your car insurance rate

September 16, 2016
insurance rate
Source: Shutterstock

Does your credit score affect your car insurance rate? Drivers have been asking this question for years and a lot of them think that it doesn’t. Unfortunately for them, they’re wrong. Unless you live in California, Massachusetts or Hawaii, your credit score will affect your auto insurance rate.

It’s amazing how many people actually believe that auto insurance companies don’t care at all about credit scores. Even worse, they’re also spreading this myth, telling others and reassuring them that a poor credit score won’t cost them if they plan to get car insurance. As a result, a lot of people start losing money, adding to their financial difficulties.

How insurance companies evaluate you

It’s no secret that your driving record is the first thing your insurance company looks at when trying to see how high is the risk of you being involved in an accident. But they also take other things into account, such as your age, gender or the kind of car you drive. And your credit score is just as relevant to your rate.

This practice has been around for more than two decades and it may not make sense to many drivers. However, several studies have already shown that there is a statistical correlation between a driver’s credit score and how much that driver costs an insurer.

According to these studies, if you have a poor credit score, then there’s a high probability that your insurer will lose money with you. That’s why people with bad credit scores usually pay higher premiums, while those with a good credit score will pay less.

How you can profit from this

Many drivers feel that this approach is not fair. After all, just because you’re not good with money, it doesn’t mean that you can’t drive. But that’s the wrong attitude. This practice can work to your advantage.

You already have to take care of your credit score. As we all know, it’s really important to have a high credit score if you want a healthy financial life. So why not use this to get a lower insurance rate?! By paying your bills on time, not skipping any payments and making sure that you have a good credit score, you can kill two birds with one stone. And don’t forget that lower premiums mean more money for you.


Around the web

Join the Conversation

Leave a Reply