Does Your Credit Score Affect Your Car Insurance?

by Gabrielle DeSantis

Shopping for a car can be tough, but shopping for car insurance can be even tougher. Although many car insurance companies are chomping at the bit to get you as their next new client, they take a few factors into consideration before doing so. But is your credit score one of those factors?

How do insurance companies come up with car insurance premiums?

Insurance appraiser from Amica Mutual Insurance Co. checking out the damage to the car of a client. | (Photo by Steve Liss/The LIFE Images Collection via Getty Images/Getty Images)

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Car insurance companies take a few different personal factors into consideration when designing a policy for you. According to Nationwide, some of these factors include:

  • Age or driving experience
  • Year, make, and model of your vehicle
  • How the vehicle is used (business, pleasure, etc.)
  • Driving history
  • Insurance claims history
  • Geographic history
  • Credit history

We’ll go over that last factor later, however, your insurance premium is heavily influenced by the type of vehicle that you drive. Not only due to the type of car it is, but it also factors in what type of insurance you’ll need. For example, if it’s older then you might not need (or want) coverages like “comprehensive” and “collision.” Also, if you drive a classic car, then you would need a different type of insurance.

Insurance companies use an auto insurance score to assess you

A teen driver using a phone at the wheel
Teen drivers can be dangerous | BSIP/Universal Images Group via Getty Images

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In addition to the aforementioned factors, car insurance companies also used what’s called an “auto insurance score.” According to Wallet Hub, the auto insurance score is much like your traditional credit score, but it’s used as an indicator of your risk. This score, along with the other factors mentioned, is what insurance companies use to evaluate the drivers that they take on as clients.

A good insurance score is considered a 700 or above and it is calculated by the Fair Isaac Corporation, LexisNexis, and TransUnion. In order to obtain your auto insurance score, you would need to contact LexisNexis directly, however, do note that inquiring about your score with put a “hard pull” on your regular credit report.

How can you improve your auto insurance score?

Insurance adjuster through broken windshield
An Allstate catastrophic claims adjuster assesses the damage to a vehicle. | (Photo by Jack Hardmann/Bloomberg via Getty Images)

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Since your credit score is largely tied to your auto insurance score, improving your credit situation will improve your auto insurance score too. Wallet Hub mentions that drivers with no credit will pay up to 67% more on car insurance than those with excellent credit. So it’s important to keep your credit standing in check.

If you need to improve your current credit score, then Experian suggests the following:

  • Pay your bills on time every month
  • If you miss a payment, bring it up to the current status as soon as possible
  • Decrease your credit utilization rate
  • Keep an eye on your credit report to ensure all of the information is accurate

Getting a better price on car insurance

While your car insurance premium includes your auto insurance score, there are other ways to lower your car insurance rate. In addition to boosting your credit score and cleaning up your report, you can also inquire about any discounts available.

Insurance companies give discounts based on your affiliations, a clean driving record, and whether or not your car is equipped with an anti-theft device. Insurance companies sometimes don’t mention these discounts upfront, so be sure to ask for them when you shop around.  

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