{"id":9317,"date":"2022-10-11T09:00:00","date_gmt":"2022-10-11T15:00:00","guid":{"rendered":"https:\/\/www.lexingtonlaw.com\/blog\/?p=9317"},"modified":"2024-11-13T16:04:41","modified_gmt":"2024-11-13T22:04:41","slug":"how-your-credit-affects-your-car-insurance","status":"publish","type":"post","link":"https:\/\/www.lexingtonlaw.com\/blog\/credit-101\/how-your-credit-affects-your-car-insurance.html","title":{"rendered":"Does your credit score affect your car insurance?"},"content":{"rendered":"\n
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The information provided on this website does not, and is not intended to, act as legal, financial or credit advice.<\/em> See Lexington Law\u2019s editorial disclosure for more information.<\/em><\/a><\/p>\n\n\n\n

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Many auto insurance companies use your auto insurance score to determine your rate, and factors that affect your credit score also play a large part in determining your auto insurance score.<\/h2>\n<\/div>\n\n\n\n

Most people are familiar with the concept of credit scores, but fewer may be aware that their credit score can impact how much they pay every month for car insurance. In fact, many auto insurance companies use something called an auto insurance score to determine your rate, and factors that affect your credit score also play a large part in determining your auto insurance score.<\/p>\n\n\n\n

If you find yourself being offered bad rates from insurance companies due to poor credit, improving your credit score will go a long way toward getting you better auto insurance rates.  <\/p>\n\n\n\n

What is an auto insurance score?<\/h2>\n\n\n\n

While both a standard credit score and an auto insurance score are based on similar pieces of information, there are some differences in how the two types of scores are calculated.<\/p>\n\n\n\n

A credit score is based on information from your credit report<\/a>, and the score is used to determine your likelihood of making payments on time. Credit scores inform the decisions lenders make, and they affect things like the interest rates, repayment periods, and loan amounts you\u2019re offered.<\/p>\n\n\n\n

An auto insurance score also uses information found in your credit report, but it may not use all the same information. In addition, factors related to your driving and insurance history form part of your overall auto insurance score, and that information isn\u2019t in a standard credit report. <\/p>\n\n\n\n

Note that in California, Hawaii, Massachusetts, Maryland, Michigan, Oregon, Utah, and Washington, the use of auto insurance scores is either banned or limited.<\/p>\n\n\n\n

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How do auto insurance scores affect your rates?<\/h2>\n\n\n\n

An auto insurance score measures the likelihood of you filing a claim. As with many types of insurance, how likely you are to file a claim impacts the rate you pay\u2014and when it comes to auto insurance, studies have shown<\/a> that drivers with less-than-great credit are more likely to file claims.<\/p>\n\n\n\n

Drivers who are likely to file claims cost auto insurance companies more money, so if you have a low auto insurance score, you\u2019re likely to be offered less attractive (meaning, more expensive) rates.<\/p>\n\n\n\n

How is your auto insurance score calculated?<\/h2>\n\n\n\n

An auto insurance score generally takes into consideration the five main credit factors, ranked here from highest to lowest in terms of how much weight they carry in a standard credit report:<\/p>\n\n\n\n

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  1. Your payment history<\/li>\n\n\n\n
  2. How much of your available credit<\/a> you use<\/li>\n\n\n\n
  3. The length of your credit history<\/li>\n\n\n\n
  4. New credit applications you submit<\/li>\n\n\n\n
  5. How many types of credit you use<\/li>\n<\/ol>\n\n\n\n

    In addition to the above, which you\u2019re probably already used to seeing in your credit report, your auto insurance score takes into account driver- and vehicle-specific factors to determine your rate. These factors may include: <\/p>\n\n\n\n