Mathew B. Sims is Editor-in-Chief and has authored, edited, and contributed to several books. He has been working in the insurance industry ensuring content is accurate for consumers who are searching for the best policies and rates. He has also been featured on sites like UpJourney.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years (BBB A+). He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com and Safeco. He reviews content, ensuring that exis...

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Apr 24, 2020

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Things to Remember...

  • Some auto insurance companies check your credit before insuring you
  • Having bad credit may mean you pay higher premiums
  • People with good credit generally have lower premiums

Did you know there is a new law in place that allows auto insurance companies to use your credit rating when determining your rates? This little auto insurance nugget slipped under many people’s radars when it was introduced.

The auto insurance industry is using your credit info to derive a few conclusions about you. Learn what they are, how they work for you or against you, and what you can do to slant things in your favor. The difference between cheap auto insurance rates and sky-high ones may depend on it.

You can find and compare auto insurance quotes from many different insurance companies. Enter your zip code above to get started now!

Credit Shows How on the Ball You Are For Paying

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You may be on the ball for paying all your bills, but your auto insurance company has no idea that you are so diligent. Your credit score is a key-determining agent in telling many companies how well you pay your bills.

Auto insurance companies can even dig into your credit history to reveal items like bankruptcy, collections, foreclosures, and other financial information.

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Higher Credit Generally Means You’re a Safe Bet

People with higher credit ratings are usually older. Rocking an excellent credit rating takes years to build up. Just as new drivers have higher insurance rates, new people to the credit score game will have lower credit scores.

This may seem unfair, but keep in mind there are various ways to pump up that credit score.

The auto insurance company is really just using your credit score as a number in a large rate algorithm. Even if you do not intend to use your credit score to secure vast amounts of credit cards, use it to drop your auto insurance rates.

Credit Score Dictates Your Ability to Pay in an Accident

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Auto insurance companies believe that people with higher credit scores are more apt to pay the bill.

Top that off that when the rates go up after an accident, people with excellent credit are viewed as more capable of paying the higher rates than those with low credit scores.

Your Agent Owes You No Explanation

The biggest hindrance to your auto insurance rates is that your agent does not have to divulge any information on how your credit score plays into your rates. Some agents may honestly have no idea how your rates are impacted by a high, or low, credit score.

Some agents may honestly have no idea how your rates are impacted by a high, or low, credit score.

Shopping for the best auto insurance rates will also teach you a fair amount about your credit scores. This is because each insurance company will use your credit ratings in different ways.

Some companies may dive deep into your credit history.

Other companies could care less about your history and just want your credit score. It may seem unfair for a company to use a late payment from five years against you, but thanks to these auto insurance laws, auto insurance companies are now able to do just that.

You now have even more reasons to watch that credit score closely. This may not seem fair to many consumers, especially those that pay cash for a majority of their purchases. Maybe it is time you get that credit score in order to keep those auto insurance rates low.

You may get better rates by having a great credit score – check it out today!  Enter your zip code below to get started comparing free auto insurance rates!

References:

  1. https://www.esurance.com/info/car/myth-your-credit-score-doesnt-affect-your-insurance-rate
  2. https://www.nationwide.com/car-insurance-credit-score.jsp
  3. https://www.forbes.com/sites/robertharrow/2016/04/25/is-your-credit-score-affecting-your-insurance-premiums/
  4. https://www.geico.com/information/credit-use-faq/
  5. http://www.consumerreports.org/cro/car-insurance/credit-scores-affect-auto-insurance-rates/index.htm