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Can Insurance Premiums Change Due to a Bad Credit/Insurance Score?

Many factors determine what your auto insurance premiums will be. Insurance providers start by looking at how long you've been driving, if you have any moving violations and your previous insurance claim history. However, were you aware that insurance companies consider your credit and insurance score as well? Here is how that three-digit number can impact your car insurance premiums.

Why a Good Credit Score Matters

All types of insurance premiums are based on risk. Your home insurance may be based on where your home is and what natural disasters it could succumb to, and your health insurance could be based on how likely it is that you'll need medical attention. Similar logic is applied to car insurance by using your credit score.
Many statistics show that drivers with a low credit score will be more likely to make an auto claim with their insurance company. The two factors may seem totally unrelated at first glance, but insurance companies need to use some sort of metric to figure out how risky you are as an individual.

How an Insurance Score Is Used

Insurance companies also use an insurance score to help determine what your premiums will be. Not familiar with an insurance score? While they are different rating systems, they both use similar metrics to rate you in terms of risk. Insurance scores will be anywhere between 200 and 997, while credit scores top out at 850. They both are similar in the sense that having a higher score means you are a lower risk.
People with insurance scores that are higher than 770 usually mean that they will be a low-risk customer and will receive a low insurance premium. The lower the score, the higher the premium rate will be due to the likelihood to make an insurance claim.

How an Insurance Score Will Be Determined

An insurance score will take several things into consideration to get to the final number. Your credit history plays a big role in that, since it is based off of risks you've taken in terms of finances over the years. Someone who has taken on more debt that has not been repaid will have a higher score.
Driving history also makes up the insurance score. Previous accidents, speeding tickets and damage claims have a direct impact on how much insurance will cost you. However, there are some factors out of your control that also make up an insurance score.
New drivers without any sort of credit or driving history will not have much information to determine an insurance score, so gender and age are used to help determine risk. Inexperienced drivers are more likely to get into an accident, so it makes sense that insurance premiums will be higher for those that just turned 16 years old.

How to Improve a Credit and Insurance Score

Fortunately, you can improve your credit score and help lower your insurance rate. First, take a look at your credit report and fix blemishes that you see. For example, pay off existing debts, and get rid of errors that may still be on the report. You should also show lower credit card utilization, which means you don’t use your cards right up to the credit limit.
Insurance scores are difficult to improve right away, since the best answer is to wait it out. You might not be able to do anything other than be a safe driver. For example, it will take about three years for any speeding ticket to go away from your driving history, and that period resets if you get another ticket.
NorCal Quote can help get you a quote on your auto insurance when you start shopping around.


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