Here’s How Your Credit Score Affects Your Car Insurance Rates

Here’s How Your Credit Score Affects Your Car Insurance Rates

When you’re on the lookout for auto insurance quotes PA residents can be sure are fair, one of the factors that you are going to take into account is your credit score. It might be surprising but your credit score can ensure that you either get a high or low premium when it comes to your insurance. Let’s take a closer look at what you can expect.

Determining Your Credit Score

The first thing you have to know is to know what your credit score is. Your FICO score is what most people talk about when talking about a “credit score.” This score is usually three-digits and represents your financial behavior when it comes to paying off loans and bills.

However, this isn’t exactly what insurance companies use. Car insurers just look at your credit history and focus on just specific parts of your credit history and create their own credit score to use.

Some of the factors that they use include how well you pay your loans, how long have you had credit, what debts you own, and whether you are applying for new credit.

How It Changes Your Premiums

The main reason for using the credit score by many insurers is to predict whether you’ll be filing any claims. The thing that a lot of people forget is that insurance is a business. The insurance companies are betting that you will be fine, while you recognize the possibility that you will not.

Using their credit score analysis, insurance companies set premiums and payouts that are more in their favor. So how does a credit score help in this? Well, according to a study done by the Insurance Information Institute is that credit scores can affect how many times a person will file claims.

The data shows that people with low credit scores are more likely to file claims that end up being costly for a company. They also tend to be most likely to fake their claims. Additionally, people with better credit scores are often thought of as more careful. Insurance companies think that people who are careful about their credit will also be more likely to take care of their cars and be more cautious on the road.

Making It Better

With a bad credit score, you’ll end up with some really bad quotes. However, all is not lost. You can get a better quote either by improving your credit score or shopping around for a better quote.

Improving your credit score usually involves paying your bills in time. This shows lenders that you are able to pay your bills on time. Combine this with paying off all of your debts aggressively and you can be sure that your credit score will go up.

Additionally, you may want to use less of your credit. At best, only use 30 percent of your available credit. This ensures that you will be able to pay off any debts that you incur.

Finally, if your credit score is not enough, you may be able to find an insurance agency willing to risk themselves on you. Look around online so that you can find a good deal.

Miller Carlisle Insurance Services is one of the most trusted insurance agencies today. If you need the best auto insurance quotes PA, contact us today.


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