September 28, 2022

Car Insurance And Credit Scores

Someone’s credit score can say a lot about what their car insurance will look like. How? Well, the whole business of insurance, in general, is about making your monthly payments on time, similar to that of a credit card. A credit score is a way for anyone to get a rating of your financial reliability, so to speak, and how likely you are to miss payments. Your credit score will follow you into all major financial decisions and products in your life, and car insurance is no exception. Here is everything you need to know about how something like your credit score affects your ability to get and pay for car insurance. 

 

Why Car Insurance Companies Look at Credit Scores

As previously mentioned, a credit score is one of the foremost indicators of financial reality to insurance companies and providers. However, there are some states where they don’t look at them –particularly in Massachusetts, Hawaii, and California. Your credit card score accounts for things like your income, occupation, and other matters of personal information. At the same time, when an insurance company is first writing you a policy, they will also look at these things. This is all to assess your risk –some occupations involve driving more, so accidents are more likely to happen. But rather than looking at your exact credit card score, car insurance companies create their own credit score designed exclusively for auto coverage. 

 

Car Insurance-Based Credit Scores

The traditional credit card score, or FICO as they are commonly known, is much different than the credit score that car insurance companies will assign you. This score is not based on much of your personal information but rather on past car insurance history. This includes past insurance claims and how often you make your monthly payments. It also mentions if you are in any kind of debt as a normal credit score would. However, a good insurance credit score doesn’t always guarantee low insurance rates. You can have a good credit score, but a bad driving history and still pay higher than average for car insurance. 

 

Statistics That Car Insurance Companies Look For  

There are several statistics and factors that car insurance companies favor and look for when consulting your car insurance credit score. Some of the best things to have are an established history of credit, little to no recorded late payments, and any open accounts or outstanding balances that are in good standing. Inversely, things like past-due payments, several accounts in collection, debt, and credit inquiries don’t reflect well on car insurance providers. 

 

Good Credit Score For Car Insurance 

We’ll end this post with the most important pointer of all –what specific credit score do car insurance companies look for? Sources and experts describe any score of at least 700 will help get you some of the best auto rates on the market. Some scores as low as 670 will also get some quality car insurance rates as long as the driving record is good. Of course, good credit scores are entirely in your power by making your monthly payments on time.          

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