Does My Credit Affect My Insurance Rates?

| Tedis Baboumian |

Your creditworthiness affects whether you’ll be approved for a loan, credit card, or mortgage, and if you’re approved, it can affect the interest rate you’ll be charged. But it’s not only the ability to borrow money that’s affected by your credit report and credit score. A potential employer, landlord, or insurance company may also pull a credit report. If you’re shopping for insurance, a question you may have is “Does my credit affect my insurance rates?”

Getting Auto Insurance

When you try to get auto insurance, the insurance company is likely to do a credit check. Many insurance companies use a scoring system that’s credit-based. Your credit is one of several factors they may consider in order to determine how risky it is to do business with you. They’ll also look at your driving record and claims history as well as demographics such as your age, where you live, as well as the age, make, and model of the vehicle you’re insuring.

Bad Credit and Insurance Rates

How much bad credit affects your insurance rates can differ from one insurance company to another. Your credit history may be important to one insurance company and not important to another. Some insurance companies may be willing to consider extenuating circumstances such as illness or job loss. In some states, including Massachusetts, California, Michigan, and Hawaii, insurance companies aren’t allowed to use credit information when determining rates for auto insurance.

Other Ways to Get Better Insurance Rates

Your credit isn’t the only factor that goes into determining your insurance rates. Some companies offer discounts for having a good driving record or for having multiple policies with the same company. You can also bring down the cost of your car insurance by having a policy with a higher deductible or lower coverage limits. Get rate quotes from more than one company and compare them.

Improving Your Credit

Your credit can affect many areas of your life, so it’s important to work on having good credit. The most important thing to do is pay your bills on time. If any of your accounts are past due, bring them up to date as soon as you can.

Carrying a high balance on credit cards can also hurt your credit. Your credit utilization rate is the percent of available credit that you’re using on revolving accounts. The lower this number is, the better. Pay down your debt when you can.

Know What’s on Your Credit Report

When you know what’s on your credit report, you probably have a good idea of whether potential creditors and insurance companies will consider you a high credit risk. Check your credit reports to make sure all the information on them is accurate. Errors on your credit report should be disputed right away.

Dovly is an AI credit engine. If there are items on your credit report that aren’t accurate, let us help you dispute them. We want to make this process as easy as possible so that we can help you improve your credit scores. Try it risk free with our free membership tier. Get in touch with Dovly today.

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