Getting Car Insurance: Can Credit Scores Affect Rates

If you’re looking for the cheapest car insurance rates, you may be wondering about some factors that can make getting car insurance more expensive. You may be surprised to hear that 1 factor that may influence your auto insurance rates is your credit score. Most people think of credit scores as mainly only affecting the process of getting a loan, but insurance providers have reasons to check your credit score as well. Read on to learn more about how and why your credit score can influence your car insurance options and rates.

Your Credit History and Insurance Claims

The reason that your credit score may affect your insurance rates is that studies have shown a strong relationship between credit score and the number of claims a person is likely to file. People with low credit scores tend to file more claims than those with a high score. This means that overall, people with a low credit score are more likely to cost the insurance provider time and money by filing claims. More specifically, people who have damaged their credit score because of a history of making late payments are more likely to file claims. Credit scores which are somewhat low due to other factors do not seem to influence the filing of claims. For this reason, an insurer will often run a check of your payment history prior to issuing a policy, and the results of this history check will affect your rates.

Higher Premiums for Lower Credit

If you have a history of missing payments or making late payments, your insurance premiums will likely be much higher than they would be otherwise. Similarly to car loan lenders, auto insurance providers are taking a risk when they offer an insurance policy to someone with poor credit. To make the gamble worthwhile, the potential gain has to be high. This results in very high rates being charged to someone who needs insurance with bad credit.

Improving Your Credit History

As previously mentioned, the most important factor within your credit score which insurance providers check is your history of making payments on time. Therefore, you can improve your credit history to qualify for lower premiums and insurance rates if you consistently pay your bills on time and in full. Even if you’ve made some credit mistakes in the past, a recent history of commitment to financial responsibility may help you when looking for insurance. Remember, too, that you can reapply for a different policy or to a different provider if a bad credit situation is improved. Keep checking back as your credit improves to see if you can qualify for lower premiums and rates.

Your credit score, or more specifically your recent payment history, can and does affect insurance rates. By building up a recent history of financial responsibility, you can help minimize the cost of getting auto insurance.