Car Insurance and the Effect Your Credit Score Has on It

Car Insurance and the Effect Your Credit Score Has on It

As a consumer, your credit score is a range of numbers that determines your creditworthiness to the company you wish to borrow or lend from. Therefore, the higher your score is, the more are your chances of getting better interest rates and loan qualifications.

Some of the factors that your credit score is based on include factors like your amount of debt, repayment history, and duration, etc. This article discusses some such aspects in-depth.

Understanding a Credit Score Based Car Insurance 

Every car owner knows that getting insurance for their car is mandatory, and while this might sometimes be expensive, depending on the premium you’re going for, there are ways in which you can reduce your insurance rates. One of these is based on your credit score, which counts just as much as your marital status, driving record, and payment history on your car insurance premiums.

It is not unheard of for some insurance companies to determine the risk of providing you with insurance quotes by taking your credit scores into account. To determine your eligibility for payment plans and your insurance rates, your credit scores along with your driving history and claims record are considered.

Why Do Insurance Providers Use Credit-based Insurance Scores?

Establishing a relationship between a customer’s credit history and the risk associated with providing insurance quotes has been beneficial on several occasions. For example, research shows that persons with excellent driving records and high credit scores generally get into fewer vehicle accidents and cost insurance companies much less than those with low credit scores.

Key Factors that Can Influence Your Credit Scores and Car Insurance Premium

Several factors could influence your credit score, thereby affecting your car insurance premium. Some of these could favor you while others might not, but it is essential to understand them to avoid low credit scores. Some such factors are:

  • Credit history: For people who have a longstanding credit history with their insurance company, you might have a better chance of getting a higher credit score, unlike someone whose credit history is short.
  • Payment history: Your payment history is also a significant factor in determining your credit score, i.e., if you have had past due accounts or a history of late payments and a tremendous amount of debt, your credit score is considered low.

As a result, you might not have a chance for a better insurance rate. However, if you’ve had no late payments or debt, you are qualified for a higher credit score.

  • Accounts Created: Opening accounts in good standing secures higher credit scores, while opening accounts in the collection doesn’t.
  • Credit Inquiries: The number of times you inquire for credit can be tracked by your insurance company, and so a high number of credit inquiries is not favorable for you if you plan on getting high credit scores.

Call our team of insurance experts Aimpro Insurance today to learn more about the effect of your credit score on car insurance! Our car insurance experts can help you find the answers to all of your queries on this subject.

Author: Aimpro Insurance
Aimpro Insurance will offer the best coverage from only the most reputable carriers. Our clients have come to depend on us to provide advice and customized programs to meet all of their insurance needs. The overall experience for our clients is “Insurance made simple.