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April 19, 2019

Factors Besides Credit Influencing Auto Insurance Rates

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Good credit takes work, and it also takes time to build. Therefore, when you first start acquiring credit, it will likely take you some time to increase your score. In the meantime, however, this credit score might make you have to face cost burdens in other parts of your life. Namely, insurance companies frequently use your credit score when determining your premium rates. Too-low a credit score might cause you to pay more for your car insurance. Are there ways you can keep your premium in check?

Luckily, more factors than your credit score can impact your car insurance rates. Therefore, you do have opportunities to actively keep your car insurance rates affordable.

Car Insurance And Credit Scores

Credit scores are measurements of your financial security. Therefore, your credit score will represent how much of a cost burden you present to your insurance companies.

An individual with a low credit score often has financial insecurity. Therefore, they might present a higher chance of not keeping their car insurance active or paying their regular premium. Not only that, financial insecurity can force individuals to have to rely more on their car insurance following vehicle losses. They might not be able to afford vehicle losses otherwise.

Therefore, it might become burdensome for insurance companies to offer policies to those with low credit. Some might even deny coverage altogether if a driver presents too high of a risk.

However, credit isn’t the only factor that an insurer uses to determine rates. In fact, credit scores alone usually won’t disqualify you from getting a policy. Insurers will most likely have to look at your risks cumulatively to determine your premiums.

Factors Impacting Your Premiums

When setting premiums, your car insurer will look at your chances of filing a claim with them. A lot of factors relating to your vehicle and driving habits will influence this risk. These might include:

  • Where you live, and the vehicle theft and accident reports of that area.
  • How far you drive each year.
  • The value of your car and any special features.
  • Your driving history and record. Those with multiple tickets or wrecks will have higher risks.
  • Your history of buying and keeping active car insurance.
  • Whether anyone else, such as a teenager or spouse, will drive your car

Therefore, your credit score, while important, will usually only impact your insurance rates in relatively small ways. Other factors might carry more weight, and some insurers won’t even use credit as a determining factor. So, talk to your insurer about whether it is even a factor in rate determination. Nevertheless, always work to build and maintain good credit throughout your life.

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