Can Insurance Premiums Change Due To A Bad Credit/Insurance Score?
There are many factors that determine what your auto insurance premiums will be. Insurance providers start by looking at how long you’ve been driving, if you have any moving violations, and your previous insurance claim history. However, were you aware that insurance companies look at your credit and insurance score as well? Here is how that three digit number can impact your car insurance premiums.
Why a Good Credit Score Matters
All types of insurance premiums are based on risk. Your home insurance may be based on where your home is and what natural disasters it could succumb to, and your health insurance could be based on how likely it is that you’ll need medical attention.
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The two factors may seem totally unrelated at first glance, but insurance companies need to use some sort of metric to determine how risky you are as an individual.
How An Insurance Score is Used
Insurance companies also use an insurance score to help determine what your premiums will be. Not familiar with an insurance score? While they are different rating systems, they both use similar metrics to rate you in terms of risk. An insurance score will be anywhere between 200-997, while a credit score tops out at 850. They both are similar in the sense that having a higher score means you are a lower risk.
People with insurance scores that are higher than 770 usually mean that they will be a low risk customer and will receive a low insurance premium in return. The lower the score, the higher the premium rate will be due to the likelihood to make an insurance claim.
How An Insurance Score Is Determined
An insurance score will take several things into consideration to get to the final number. Your credit history pays a big roll in that, since it is based off of risks you’ve taken in terms of finances over the years. Someone that has taken on more debt that has not been repaid will have a higher
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Inexperienced drivers are more likely to get into an accident, so it makes sense that insurance premiums will be higher for those that just turned 16 years old.
How Can You Improve Credit and Insurance Scores?
It will be possible to improve your credit score and help lower your insurance rate. This can be done by looking at your credit report and fixing blemishes that you see. This includes paying off existing debts, and getting rid of errors that may still be on the report. You should also be showing lower credit card utilization, which means you are not using your cards right up to the credit limit.
Insurance scores are difficult to improve right away, since the best answer is to wait it out. For example, there is nothing else you can do other than drive safely after you were in an auto accident. It will take about 3 years for any speeding ticket to go away from your driving history as well.
NorCal Quote can help get you a quote on your auto insurance when you start shopping around.
https://www.nerdwallet.com/blog/finance/credit-scores-matter-car-insurance/