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Do You Know How Your Insurance Premium Is Affected By Your Credit Score?

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You may not be aware that when applying for auto insurance that the agent is also taking a look at your personal credit score. It plays a part in what your premiums ultimately end up being in the end. Here is what you need to know about how insurance and credit scores relate.

Why Does Your Credit Score Matter?

The way that insurance companies determine premiums is by determining how big of a risk you are when it comes to driving. Based on statistics, people that have lower credit scores will be more likely to file an insurance claim on their auto insurance. Even though it may seem like driving and credit scores are unrelated, this is used to help categorize drivers when determining rates.

If an insurance provider isn't pulling your credit, there are other techniques that they use to determine how big of a risk you are

What Is Your Insurance Score?

Your insurance score will be another way that insurance companies gauge how big of a risk you are. It is very similar to your credit score, and also used in a similar way.

The range of an insurance score is between 200 and 997, which is different than a credit score that goes up to 850. The higher your score, the better your rating is. If you have an insurance score that is 770 or above, you are considered to have a good insurance score and are a lower risk in the eyes of your insurance company. You'll receive a lower premium in return.

What Determines Your Insurance Score?

An insurance score is based off of many factors, but it starts by looking at what is in your existing credit history. It then adds in other factors related to your driving, such as if you have received speeding tickets, been in auto accidents, or filed an insurance claim in the past. It also takes into consideration your age and gender. This is more important if you are a new driver and do not have a previous driving history, since young drivers are considered more of a risk than older and experienced drivers.

How Can You Improve Your Scores?

You can make improvements to your own credit score by paying off debts that show up on a credit report to improve your score. For your insurance score, there is not much you can do other than drive safely and wait out any infractions. For instance, a traffic violation will remain on your driving record for 3 years from the date of conviction.

For more information about how your credit and insurance scores affect your premiums, speak to an agent, like one from House-Chilson & Associates.