How Credit Affects Auto Insurance: A Study

LOS ANGELES - Feb. 23, 2023 - PRLog -- Unless you live in California, Hawaii, Maryland, Massachusetts or Michigan, insurance companies use your credit score to determine your rate. If you have a low credit score, you will undoubtedly pay more for insurance. Why? Insurance companies see a direct correlation between low credit scores and the likelihood of that driver filing an insurance claim in the future. Here's more on how your credit score affects your premium and how to get the best deal if your credit score is low.

Key Takeaways

• A poor credit can easily raise your premiums by 70% or more.
• Except in California, Hawaii, Maryland, Massachusetts and Michigan, every state allows insurers to do a credit check.
• Your credit score is not affected if you get an insurance quote or switch carriers.

How Much Does My Credit Affect My Insurance Rate?

A low credit score can raise your monthly premium by more than 70%. How much you save exactly depends on your insurance company and where you live (see the chart below). There are no set parameters for how to rate credit scores so it's worth it to compare rates if your credit score is less than perfect.

What's a Credit Score and How Is it Determined?

Your credit score is the same thing as your FICO score and is usually between 300 and 850 points. It is a predictor of whether or not you will pay your bills or loan. You will need good credit to buy or lease a car, to rent or buy a home and more.

The points on your credit score are determined based on:

• Payment history: 35%
• Amounts owed: 30%
• Length of credit history: 15%
• How many types of credit in use: 10%
• Account inquiries: 10%

Many will give you the information at no cost. Or you can contact the major credit bureaus on your own: Equifax®, Experian®, and TransUnion®. You are legally allowed one free credit report every 12 months.

Credit TierFico Score

Excellent   800-850

Very Good   740-799

Good   670-739

Fair   580-669

Poor   300-579

For the full article, visit https://smartfinancial.com/how-credit-affects-car-insurance