Car Insurance And Your Credit Score: Everything You Need To Know

There are many factors that affect how much you will pay for auto insurance. Some of the factors include your age, your marital status, the type of vehicle you drive, how long you have been driving, your driving record, and the insurance coverage you select. Another factor that may affect your rate is your credit score. Here is everything you need to know about your credit score and car insurance

Can Your Credit Score Affect the Amount You Pay For Car Insurance? 

At this time, your credit score can affect the amount you pay for car insurance in many states. There are a few states, such as Michigan, Massachusetts, Hawaii, and California that limit the amount of information auto insurers can look at when pulling a credit score, or prohibit it entirely. There are also other states that are looking into prohibiting the practice. However, for the time being, most states do allow auto insurance companies to look at your credit report and use information, such as your credit score and late payments, as a factor in determining how much you will pay and if you will be offered auto insurance. 

Why Do Credit Scores Affect Car Insurance Premiums? 

There are two primary reasons why auto insurance companies look at your credit report when determining how much you will pay. Studies have shown that those with poor credit are more likely to default on their auto insurance payments. Additionally, those with low credit are more likely to file a claim compared to someone with higher credit. As such, insurance companies have to determine if it is worth the risk to them to insure you. 

What Can You Do If You Have a Low Credit Score and Need Car Insurance? 

If you have a low credit score, it is recommended that you work toward improving your credit score. Once your credit increases, you should take the time to shop around for a new auto insurance policy. Many people are able to get lower rates once their credit score increases. 

Shopping for auto insurance can be challenging, as there are many factors that can affect the amount you will pay. If you are in the market for a car insurance policy, always take the time to get quotes from multiple companies. Different companies base their pricing on different factors, so one company may be better for someone with accidents or one company may be better for someone with a low credit score. Getting multiple quotes is the best way to find the right auto insurance company for your needs.