How your credit score can affect your insurance rates (2024)

FAQs

How your credit score can affect your insurance rates? ›

According to the III, if you have a better credit-based insurance score, an excellent driving history, and zero claims on your record, you'll typically qualify for lower rates. This score is only one of many factors used to calculate your premium.

Most insurance companies use your credit history to help them decide whether to sell you insurance and how much it will cost.

In most states, insurers can consider your credit history when deciding whether to insure your home and when calculating your monthly premiums. (California, Hawaii, Maryland, Massachusetts, Michigan, Nevada, Oregon and Utah either prohibit or greatly restrict credit-based insurance decisions.)

A good insurance score is roughly 700 or higher, though it differs by company. You can improve your auto insurance score by checking your credit reports for errors, managing credit responsibly, and building a long credit history.

Why do insurance companies use credit information? Some insurance companies have shown that information in a credit report can predict which consumers are likely to file insurance claims. They believe that consumers who are more likely to file claims should pay more for their insurance.

How much your score affects your rates varies between states. Four states — California, Hawaii, Massachusetts and Michigan — ban companies from using your credit report to determine insurance rates. Instead, companies in these states base rates on your driving record, location and other characteristics.

You can still get car insurance with no credit history, but you'll likely pay higher premiums than drivers with good credit or longer credit history.

As mentioned above, California, Hawaii, Massachusetts and Michigan currently ban insurers from using credit.

Yes, Geico does use your credit score as a factor when determining your car insurance rates, as do most major insurers. However, credit checks by auto insurers do not harm your credit score and are only done in states where it is legal for your credit score to affect your rates.

Insurance premiums are based on a wide variety of factors such as vehicle type, how the vehicle is used, driving history of all drivers listed on the policy, as well as claims history. Studies have shown that credit-based insurance scores have a strong correlation with the likelihood of filing a claim.

How much does bad credit affect your car insurance? ›

Depending on the laws about insurance in their state, drivers with Very Poor credit scores can see rate increases anywhere between 56% and 207%. Drivers can lower their insurance rate by an average of 17% (or $384) by improving their credit score by just one tier.

Some factors that may affect your auto insurance premiums are your car, your driving habits, demographic factors and the coverages, limits and deductibles you choose. These factors may include things such as your age and your driving record.

If your scores are lower than you'd like, there are a few things you can do, or avoid doing, to help improve them. Making all of your debt payments on time, keeping your credit utilization down, and having numerous accounts in good standing can help your auto insurance scores (and your credit scores, too!).

Insurance companies in California don't use credit-based scores or your credit history for underwriting or rating auto policies, or setting rates for homeowners insurance. As a result, your credit won't impact your ability to get or renew a policy, or how much you pay in premiums.

Although ranges vary depending on the credit scoring model, generally credit scores from 580 to 669 are considered fair; 670 to 739 are considered good; 740 to 799 are considered very good; and 800 and up are considered excellent.

Although some insurance companies still look at your actual credit report, most insurance companies using credit information are using a “credit score.” A credit score is a snapshot of your credit at one point in time.

Your credit score may influence your ability to: Qualify for a credit card, personal loan, private student loan, auto loan or mortgage. Rent an apartment or buy a house. Set up utilities in your home without paying a hefty deposit.

Medical bills affect your credit score only if a collection agency gets involved. If you don't pay your bill and it becomes significantly past due, your health care provider may give up on collecting the debt from you and sell it to a collection agency.

Typically, the higher your credit rating, the less you will pay for home insurance in the states where credit is considered a rating factor. Although it is only one factor in setting rates for home insurance, data shows that the credit-based insurance score is an important one.