Your credit score has a powerful impact on every area of your financial life. But did you know that your credit score also affects your auto insurance rate? No one wants to pay more than needed for their auto insurance. Therefore, understanding how your credit score can impact how much you pay is essential to help you start saving money.
In this blog, we’ll explain everything you need to know about your credit score and its impact on your auto insurance rates. We’ll also detail ways to boost your credit score and lower your auto insurance rates to help you reduce how much you pay each month.
A credit score is a rating used to rank your creditworthiness. It is a number between 300 and 850, representing and estimating how likely you are to repay the money you have spent based on past credit reports. The higher the number, the better your credit score.
Being informed about credit scores and how your score stacks up is essential for managing your financial life effectively. Your credit score can directly impact many aspects of your finances. Individuals with higher credit scores are more likely to be approved for loans and mortgages.
Your credit score also matters when you apply for a financial agreement. This includes applications for credit cards, bank loans, cell phone contracts, car loans, and even payment plans used to spread out the cost of items you buy in-store or online.
It also helps you access lines of credit, and having a higher credit score also means you’re more likely to be offered the best rates. It impacts not only your likelihood of being offered a loan in the first place but also the terms of the loan agreement.
Several factors are taken into account when your credit score is calculated. Being aware of these factors is crucial to managing your credit score. These are:
Insurance companies often use credit-based scores to assess a client's risk level when providing an auto insurance policy. This means that clients with a lower credit score could be charged higher rates for their auto insurance.
Studies carried out by insurance companies suggest that there is a connection between how well a person manages their financial affairs and their likelihood of filing an insurance claim.
Research conducted by the Federal Trade Commission (FTC) has shown that drivers with higher credit scores are likely to have fewer accidents and, therefore, less likely to cost insurance companies as much in claims.
Auto insurers use several factors to calculate insurance rates. These include:
Insurance companies widely use credit-based insurance scores throughout the United States. Residents of Idaho Falls can expect their auto insurance rates to be influenced by their credit scores. However, some states do not utilize this method.
States that do not permit the use of credit-based insurance scores to be used to set auto insurance rates include:
Taking action to improve your credit score is highly beneficial to your finances. Here are some of the ways that you can take a proactive approach to improve your credit score:
Taking action to improve your credit score is one helpful way to enhance your insurance-based credit score and reduce your auto insurance rates. However, additional ways exist to help reduce the amount you pay for your auto insurance. These include:
Your credit score significantly impacts every area of your finances, including how much you pay for your auto insurance rates. The above steps to improve your credit score can dramatically benefit your finances, including reducing your auto insurance rates.
Reviewing your current auto insurance rates and checking your credit score will help you to identify where changes can be made to improve your credit rating.
Contact Alpine Castle Lake Insurance today to discover how we can help you with your auto insurance needs and get an instant quote.