FAQ: Why Does My Credit Score Affect My Car Insurance Rates?

FAQ: Why does My Credit Score Affect My Car Insurance Rates?

Why does my Credit Score affect my car insurance rates?

A car crash on Jagtvej in Copenhagen, Denmark. (Photo credit: Wikipedia)

Your car insurance rates are determined by your age, where you live , your driving record…and your credit score.  Those with a very good credit score of 750 or better can expect to pay considerably less for their car insurance.  Young adults from 25-34 with average or below average credit scores and clean driving records can expect to pay an average of $1938.00 for car insurance while those with excellent credit scores of 750 or above will pay an average of only $1155.00 or 40% less.  This holds true for older people too.

Why they care about your Credit Score

Insurance companies want to know your credit score to determine if you will pay your insurance bill as it comes due. People with low credit scores are seen as people who need money.  This may make them more likely to file a phony claim or exaggerate any damages sustained as the result of an accident. But there is another reason.  It has to do with the pervasive attitude that your credit score is a barometer of your moral character.

  Many fine people have low credit scores for a variety of reasons including bad luck, illness or generosity.

This group of people constitute the backbone of our society.   There are always mean spirited people to kick those who are down.  Insurance companies are very creative in finding ways to get their hands in your pocket.  A low credit score the flimsiest of excuses to charge people higher rates.  The consumer is trapped into buying at any cost if he wants to drive.

Insurance companies claim there is a correlation between your credit score and the likelihood you will file a claim.  California and Massachusetts forbid this, regarding it as a kind of discrimination, but efforts to forbid it federally have failed.  Some insurance companies give more weight to credit scores than others. A recent study showed Allstate relied on credit scoring data the most with a difference of 116 percent between those with good credit scores and poor credit scores.  State Farm relied on credit scoring data the least with a 45 percent differential.  Farmers, Geico and Progressive were in the middle between these two extremes.  Consumers may want to use this information to help decide where to apply for their insurance.

Your “Insurance Score” is different

Insurance companies calculate the insurance credit score a little differently than the FICO score that is used for most purposes by Lenders.  Extra weight is given in particular to past bankruptcies and maxed out credit cards.

just one more reason to stay on top of your credit score!  why does my credit score affect my car insurance rates?  fair or not it does.



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After practicing law for 37 years Edward F. St. Onge, Sr. now devotes all his time to helping consumers achieve a high credit score with amazing speed. Learn the counter-intuitive secrets to credit scoring through his down to earth instructions backed by extensive knowledge of the laws and trends. All of the latest tricks and techniques that they don't want you to know now at your disposal. At last a level playing field for the consumer!

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