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3 years ago · by · 0 comments

How Credit Scores Affect Car Insurance Costs

Your credit score can affect your auto insurance rates. There are many different factors that can determine how much you have to pay for your auto insurance premiums, whether that be the type of car you drive to the age of the drivers in your household, such factors can result end up adding hundreds of dollars each and every year in auto insurance premiums.


So how does your credit score affect car insurance rates?

Auto insurance companies often see one’s credit score as a good predictor of risk. An individual with more risk is more likely to file numerous or costly claims with the insurance company, and is therefore more expensive for a company to insure.

As a result, auto insurance companies try to look at factors that increase their risk and then adjust your premiums accordingly. While there is controversy and disagreement as to whether this is actually the case, the industry seems pretty set to this idea.

If you have a poor credit score, the insurance company considers you to be a higher risk than someone who doesn’t, which may mean that you can expect to pay more for your premiums. In some cases, this can be an additional 20 percent or even more.


What information is in a credit report?

cr001Identifying Information – Name, current and previous addresses, Social Security number, telephone number, date of birth
Credit History – History of satisfying obligations to retail stores, banks, finance companies and mortgage companies
Public Records – Judgments, foreclosures, bankruptcies, collections, tax liens, garnishments
Inquiries – Identifies credit grantors or other authorized parties that have received a copy of the consumer’s credit report, typically during the past 2 years. Also lists companies who received consumer information for the purpose of offering credit or other promotions.


How can you protect myself?

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:

1. Pay your bills on time, all the time. This is the most common sense credit advice there is, and it is also the most powerful. Approximately a third of your credit score is based on your bill-paying history.

2. Be proactive in monitoring your debt ratio. Debt ratio is the ratio of debt you are carrying when compared with your credit limits. The lower your debt ratio, the better your credit score. The rule of thumb is that you will want to keep that ratio at 30 percent or less.

3. Don’t apply for new credit too often. Whenever you apply for a new credit card or loan, the lender does a credit check. Your credit score drops a little bit each time a credit check takes place. If you do it a many times within a short time frame, your credit score can drop significantly.


More than 97% of insurance companies have been referring to credit-based insurance scores to determine car insurance premiums. However, depending on insurance companies, the amount of weight that each provider puts on your credit score may vary significantly.

While it may be difficult to avoid all situations that may lead to bad credit, understanding what they are can help you keep a lookout on key indicators that take a toll on credit score. Start comparing free auto insurance rates and start saving some money.



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Company Information

Omni Safe Insurance
1216 South Brookhurst St
Anaheim, CA 92804

3401 Pacheco Rd, Suite 1
Bakersfield, CA 93313

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(877) 728-9966

Monday - Friday: 9:00am - 6:00pm
Saturday: 10:00am - 2:00pm
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