How Your Credit Score Impacts Your Auto Insurance Rates

Auto insurance is an essential and usually legally required investment for vehicle owners and drivers. However, rates can fluctuate greatly depending on motorists’ unique circumstances. Many aspects of a policyholder’s life may come into consideration as carriers calculate auto insurance quotes. Understanding these factors, such as your credit-based insurance score, can help you improve your perceived risk level and find an ideal rate.

What Is a Credit-based Insurance Score?

As its name suggests, a credit-based insurance score is calculated using an individual’s or business’s credit rating. This practice is legal in most states, including Georgia. Carriers use this process to help them determine your personal risk levels, as, according to the Insurance Information Institute, statistics show that if you have worse credit, you’re more likely to file a claim against your policy. As such, insurers may consider you riskier and increase premiums.

Credit-based insurance scores do not typically consider personal information, such as your occupation, income or gender. Instead, these statistics are generally formulated through analysis of the following aspects of your credit:

• Payment history—Failing to make payments on time and delinquencies may have an adverse impact on your rates.
• Credit history length—Those with shorter credit histories may appear riskier and be quoted higher rates.
• Types of credit—The makeup of your credit portfolio may also affect your credit-based insurance score and, subsequently, your auto policy’s costs.

How Can I Improve My Rates?

Taking steps to improve your credit score can directly impact your auto insurance premiums. Make sure you keep up with payments and avoid carrying significant balances or defaulting on loans. Additionally, diversifying your portfolio with multiple forms of credit (e.g., credit cards, mortgages and auto loans) can help.

We’re Here to Help

Contact the team at Insurance Direct Group in Norcross, GA, today to learn more about credit-based insurance scores or compare personalized auto quotes.

This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.