Does Your Credit Score Affect Your Car Insurance Rates?

Yes, in most instances, your credit score will impact how much you pay for car insurance. It should be understood, though, that the credit score is not the only factor that is considered by automobile insurance companies.

Other factors include your age, your marital status, the neighborhood where you live due to the fact that is where the car is kept, the type of vehicle you drive, the color of the vehicle, your payment history, and your driving record.

For the purpose and intent of this post, we are going to focus – specifically – on the credit score and its impact on car insurance rates. 

Do All States Use Credit Scores to Determine Car Insurance Rates? 

No, not all states use a credit-based score to determine car insurance rates. There are several states that have actually banned this practice. To date, those include California, Hawaii, Maryland, Massachusetts, and Michigan. It is believed that many states will eventually adopt this policy. 

How Much Does Your Credit Score Affect Car Insurance Rates?

The effect your credit score has on your car insurance rates will vary from one state to another. Additionally, it varies between the various insurance companies throughout the United States. Having poor credit typically increases rates by about 75%.

Having good credit could result in up to 50% being deducted from your bill. So, in short, if you have a high credit score you will generally pay significantly less on your car insurance rates. 

Is Just the Credit Score Number Looked at by Car Insurance Companies? 

While it is true that your score is a significant point of interest with car insurance companies, they invest interest in other factors, too. These include the following – along with the average percentage of importance:

  • 35% – Your Payment History
  • 30% – The Total Amount You Owe
  • 15% – How Long You Have Had Credit
  • 10% – The Various Credit Types You Have
  • 10% – If You Have Any New Credit

What Credit Scores Are Bad and What Credit Scores are Good?

The following represents a basic outline of the tiers associated with credit scores:

  • 300-579 – “Poor” Credit
  • 580-669 – “Fair” Credit
  • 670-739 – “Good” Credit
  • 740-799 – “Very Good” Credit 
  • 800-850 – “Excellent” Credit

Car insurance companies will pull your complete credit report. They will then run it through a specially-designed program. This uses various types of algorithms to come up with a number, which is the calculation of your “insurance score”. 

What Is an Insurance Score? 

An insurance score is a number calculated from your complete credit report and algorithm interpretations that outline how much of a “risk” you are – in terms of claims, etc. on a car insurance policy. 

What If I Don’t Have Credit at All? 

If you do not have any credit history, the insurance company could elect to penalize you. This is because many insurer’s view no credit history in the same manner as poor credit history. There are some states – such as New Jersey – that prohibit insurance companies from the practice of penalizing over having no credit history 

Contact Us

If you want to obtain the best rate for car insurance – regardless of your credit history – contact us here at Modica Associates today. We will obtain your information, that of your vehicle, and your driving history and run it through our system to find you the absolute best quote. Contact us immediately by calling the following number:  718-855-1836

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