Advertiser Disclosure
X

Advertiser Disclosure: The credit card and banking offers that appear on this site are from credit card companies and banks from which MoneyCrashers.com receives compensation. This compensation may impact how and where products appear on this site, including, for example, the order in which they appear on category pages. MoneyCrashers.com does not include all banks, credit card companies or all available credit card offers, although best efforts are made to include a comprehensive list of offers regardless of compensation. Advertiser partners include American Express, Chase, U.S. Bank, and Barclaycard, among others.

By

Views

1.3K

Shares

16

Dig Deeper

24,392FansLike
23,959FollowersFollow
41,943FollowersFollow

Become a Money Crasher!
Join our community.

How Your Credit History Can Cost You on Car Insurance – Get Your Auto Insurance Score

Views

1.3K

Shares

16

Auto insurance scores are finally starting to share some of the limelight with credit scores. Consumers are learning more about what this other credit scoring model is and how it could potentially raise or lower car insurance costs.

So what exactly is an auto insurance score? Here’s the lowdown on how auto insurance scores work, how “fair” are they, and what you should do about yours to improve your situation.

Why Does My Credit Affect How Much I Pay For Auto Insurance?

That’s the question most people wonder about auto insurance scores: how on earth is their credit rating related to their car insurance?

An auto insurance score is calculated from a formula that uses information from your credit history and credit report, similar to a credit score model. The same way that credit scores measure your creditworthiness in the eyes of lenders, your auto insurance score measures your riskiness to insurers and, more specifically, your likelihood to file a claim. Using your credit information plugged into an auto insurance score, insurers will price your auto insurance premiums up or down according to how risky you are. If you’re not familiar with the various factors, here’s what hurts and affects your credit score.

Studies show that there is a correlation between credit behavior and likelihood of filing a claim. Basically, those with better credit tend to file fewer claims, so their insurance is priced down. On the other hand, those with worse credit tend to file more claims and be more expensive to insure, so their insurance is priced up. As you can see, the effects of a bad credit score seeps into everyday life, including your ability to get favorable mortgages, loans, and insurance.

Whether or not this is a fair practice is somewhat of a moot point, unfortunately. The majority of insurers in most states use auto insurance scores to help determine consumers’ insurance rates. The real question is, what should consumers do?

What Can I Do About My Credit and Auto Insurance Rates?

The first step before doing anything about your auto insurance score is simply to know it.

On a range from 150-950, you can view your insurability from poor to high, plus get a brief summary that discusses the impact of your auto insurance score on your insurance rates. It’s insight like this that can shine a little light on your credit situation so you can do something about it.

Now, how do you go about fixing your auto insurance score?

Game Plan for Improving Your Auto Insurance Score

The first step is always to know what’s up with your credit situation, then make a game plan on how to improve your credit if you know what is weighing it down.

Some of the common adverse factors affecting auto insurance scores include:

  1. Oldest credit account has short history – Your oldest account was opened within the last 6 or so years.
  2. Credit history is too recent – A significant percentage of your credit accounts were opened in the last 2 years, and need more established history.
  3. Not enough mix of credit accounts – You need a more diverse mix of credit, that includes credit cards, loans, a mortgage, and more.
  4. Late payments – Late payments of 30 days or more on one or more accounts can seriously damage your credit.

Do you think any of these factors may be contributing to your low auto insurance score or poor credit in general? Check out your own Auto Insurance Score, and the issues that are affecting your insurability. That way, you’ll know how to better your credit health, improve your credit score rating, and save money on car insurance.

Next Up on
Money Crashers

Where To Invest Gold Coins Chalk Notepad

7 Best Stock Screeners of 2020 (Free & Paid Apps or Software)

How do you choose which stocks to buy? While many investors choose to simply buy index funds as an easy way to “invest in the market,” others aim to beat the market by picking individual stocks. That’s where stock screeners come in handy.
Recession Proof Investments Downturn

11 Recession-Proof Stocks & Investments That Protect You From Downturns

Are you worried about a recession wreaking havoc on your portfolio? If the specter of an upcoming recession spooks you, then forget about high-volatility equities such as penny stocks. Even solid blue chip stocks often take a nosedive during recessions. Instead, start looking into recession-proof — or at least recession-resistant — investments that can reduce risk in your portfolio and emerge from the storm even stronger.

Latest on
Money Crashers

Sign Up For Our Newsletter

See why 218,388 people subscribe to our newsletter.

What Do You Want To Do
With Your Money?

Make
Money

Explore

Manage
Money

Explore

Save
Money

Explore

Borrow
Money

Explore

Protect
Money

Explore

Invest
Money

Explore