Your credit-based auto insurance scores affect your auto insurance rate much like you would expect your credit scores to affect your interest rate on a new loan.
Insurance scores affect your auto insurance rate in a predictable manner. The better your insurance scores are, the lower your auto insurance rate will typically be. On the other hand, if your insurance scores aren’t doing well, your auto insurance rate will likely be higher.
Of course, credit-based insurance scores are only one of many factors that determine the rates you might be offered and only if insurance companies can use them.
How do insurance companies use my auto insurance score?
Insurance companies use your credit-based auto insurance score as one of many factors to determine the premiums they charge. In addition to insurance scores, insurance companies usually consider factors like:
When insurance scores are combined with other factors, insurance companies can better determine the likelihood of insurance losses. That’s important because insurance companies are in business to make money, which means they need to make sure they can cover future losses and their expenses, and still be able to turn a profit. Based on all the information at their disposal, including your credit-based insurance score, insurance companies then set premiums for your auto insurance policy.
Insurance score factors
The exact factors that influence your insurance score can vary from company to company. But all insurance companies are trying to determine risk, so the factors are likely similar. They may disregard some credit details that have no impact on insurance risk, or they may factor in some of the same credit information but at different degrees.
The credit-score made up of the following major credit categories:
What factors hurt my credit-based auto insurance score?
While credit scores and insurance scores are calculated in different ways, many of the same negative activities can hurt both. The difference is that the actions may affect your credit scores and insurance score in slightly different ways or by differing degrees of severity.
Below is the following examples of credit factors that could hurt your insurance score:
What can I do to improve my credit-based auto insurance score?
Improving your auto insurance score could help you find lower insurance rates, all other factors held equal. Ultimately, it comes down to practicing good credit health habits. For example, here are some of the habits that could help your insurance score: