There are many factors to consider when getting auto insurance, but one of the most important is your credit score. So, if you have a very low credit score, you may find it difficult to get cheap auto insurance. Here, we’ll walk you through some key details to help you understand why and how credit affects insurance premiums.
Why Do Auto Insurance Companies Use The Credit Score To Calculate Rates?
Insurance companies assume that drivers with low credit scores are more likely to be involved in accidents. That means if you have a very low credit score, it’s more likely that insurers will lose money by covering you. To accommodate that risk, insurance companies usually charge a higher premium.
How Do Auto Insurance Companies Calculate Your Score?
Auto insurance companies don’t use the standard scores. Instead, they take your Experian credit score or FICO, plug it into their own algorithm, and create a credit score for you. By doing this, car insurance companies can have a credit score that reflects your risk as a driver.
How Much Does Your Credit Score Impact Auto Insurance Rates?
Insurance companies use your credit score to determine your auto insurance rates differently. If you want to know how much value an auto insurance company places on credit scores, try to call your insurer and ask them. Usually, insurance providers are transparent about how they determine their quotes so that you can know how to improve your rates.