How Credit Scores Affect Auto Insurance Rates

creditDid you know that when you apply for car insurance, the insurance company looks at your credit score as well as your driving history? Your credit score is actually one of the major determining factors on how much you will pay for your insurance premiums. Here is some more information on how credit scores affect auto insurance rates and what you can do to improve your credit score and in turn, lower your insurance rates.

How Credit Scores Affect Auto Insurance Rates

Insurance companies determine their rates by placing people into groups based on different factors. Research by actuaries have discovered that people with lower credit scores tend to have more automobile accidents; no one is sure why this is the case. Research shows that drivers with lower credit scores have made 40% more claims than drivers with higher credit scores. Actuarial research also shows that younger drivers have more car accidents than older drivers, that women tend to be safer drivers than men, and that drivers with two moving violations over the course of three years have more risk of another accident than those with no moving violations. Because of this research, insurance companies group clients by criteria such as credit score, age, gender, moving violations, and accidents.

What You Can Do To Keep Car Insurance Costs Low

In addition to doing your best to avoid moving violations and car accidents, it is in your best interest to pay attention to your credit score. Different companies have different criteria regarding this. Some companies will only accept clients with a clean driving record and high credit score whereas other companies are a little more lenient. However, no matter the company, having a higher credit score can mean you pay less for your insurance. You can monitor your credit on your own. Every year, ask for a copy of your credit report from each of the three major credit agencies. If there are errors on the report, get them corrected soon as possible. Your total debt and bill paying history also affect your credit score so keep credit card balances low and pay your bills on time.

It can take time to improve your credit score, but the money saved by having a high score is worth the effort. High credit scores can equal lower insurance payments as well as lower interest rates on loans. An independent insurance agent can give you more information on how credit scores affect auto insurance rates and can provide you with additional advice on improving your credit score.