Credit Score And Insurance Rates: Good Credit Can Save Money
There are many auto insurance companies to choose from when shopping for a car insurance quote. The right one can save you a lot of money on your car insurance premiums. And so can a good credit score!
We’ll explain how your credit score impacts your auto insurance rates, whether other types of insurance are impacted by your credit score, how you can reduce your auto insurance costs, and how to improve your credit score.
Credit scores and insurance rates
Your credit history and credit score are a way for people and entities like lenders, landlords, and auto insurance companies to assess risk. If they lend you money, rent you an apartment, or insure your car or truck, how likely are you to pay the money back, pay your rent on time, or get into an accident that requires filing an insurance claim?
The reasoning is that if you’re responsible with your bills, you’re responsible in other areas of your life too, reducing the odds that you’ll file a claim the insurance company has to pay. So the better your credit score, the more responsible you appear to be, and the less risk you are to insure. Insurance companies can check your credit but they must adhere to the Fair Credit Reporting Act under Federal Trade Commission (FTC) guidelines.
Your credit score can also impact your ability to be approved for and the rate for life insurance policies for the same reasons it impacts your ability to be approved for and the rate of your auto insurance. Poor credit makes you look like more of a risk to the insurer.
Reducing auto insurance rates
The average cost of auto insurance in the U.S. is $1,655 per year for full coverage. Auto insurance requirements vary by state, and not all states require full coverage. Prices vary widely by state as well. Whatever you’re currently paying for your auto insurance, there are a few ways to bring those costs down. It’s easy to shop online to compare rates between insurers. Be sure to get the amount and kind of coverage that’s best for you rather than just choosing the lowest cost option.
Marital status matters because statistically, insurance companies have found that married drivers are less likely to file claims than single, divorced, or widowed drivers.
Your driving history impacts your rates. Keeping your driving history free of accidents or violations (traffic tickets) can lower premiums. Some insurance companies give a discount to drivers who complete a defensive driving course. Insuring more than one vehicle can help bring down rates, so if you and your spouse have different policies, buying one together can reduce your rates.
If you have a high school or college student who is on your policy and they maintain a B Grade Point Average (GPA), you may receive a discount.
Ways to improve your credit score
Improving your credit score is beneficial in many ways, including lowering your auto insurance premiums, and there are several ways to do it:
Reduce utilization: A new credit card or a debt consolidation loan can help.
Increase your number of on-time payments: Experian Boost is a free service that reports payments not typically reported on your credit score.
Correct mistakes on your credit report: It’s not uncommon for there to be errors on your credit report, and they can hurt your credit score. Get copies of your credit reports and dispute any errors you find.
Improve your credit with Upwardli: Upwardli can help you build and improve your credit score and faster than you might think! We also have lots of tools and resources to help you navigate the U.S. personal finance system.
