Will my credit score affect my auto insurance?

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Things to Remember...
  • Credit scores can affect your auto insurance rates
  • A credit score is one way an insurance company assigns risk
  • Usually, someone with a high credit score is seen as a lower risk
  • Keep your credit score good in order to have lower insurance rates

As you probably well know by now, there are many different factors that can play a role in how much you have to pay for your auto insurance premiums, including your credit score.

From the type of car you drive to the age of the drivers in your household, these factors can mean the different of hundreds of dollars each and every year in auto insurance premiums.

Just how much your credit affects your rates will have to do with the auto insurance laws in your state, the auto insurance company you do business with, and finally, your personal history.

You can find and compare auto insurance quotes from many different insurance companies – just enter your zip code above right now!

How is my credit score used to determine my auto insurance rates?

 

Auto insurance companies try to look at factors that increase their risk and then adjust your premiums accordingly.

There are some in the auto insurance industry who believe, for example, that a poor credit score is usually associated with a situation of greater risk.

Despite the controversy and disagreement about whether this is actually the case, the industry seems pretty committed to the idea.

If you have a poor credit score, the insurance company considers you to be a higher risk than someone who has a good score. Therefore, you might have to pay more for your premiums.

In some cases, this can be an additional 20 percent or even more.

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Does everyone have to worry about credit scores?

The practice of using the credit score as a factor in your auto insurance premiums, while widespread, isn’t universal.

In fact, some states have actually made that against auto insurance laws.

There is also talk at the federal level about legislation that would forbid insurance companies from using credit scores or other credit information as a part of the premium assessment process, but so far nothing has come of that.

How can I protect myself?

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The best thing that you can do, of course, is to keep your credit score up if you live in a state where insurance companies factor it into your premium costs.

That’s often easier to say than it is to do, of course.

However, there are a few basic things you can do in order to keep your numbers looking good:

  • Pay your bills on time, all the time. That’s the most basic credit advice there is, but it’s also the most powerful. About a third of your credit score is based on your bill-paying history
  • Watch your debt ratio. Your debt ratio is the ratio of debt you’re carrying when compared with your credit limits. The lower your debt ratio, the better your credit score
  • Don’t apply for new credit too often. Whenever you apply for a new credit card or loan, the lender does a credit check. Each time this happens, your credit score drops a little bit

While you may not be able to avoid all situations that might lead to bad credit, knowing what they are can help put you on the lookout for these kinds of disasters.

Enter your zip code in on this page to get started comparing free auto insurance rates and start saving some money!

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