How To Get a Better Car Insurance Rate By Raising Your Credit Score
Written by
J. Arky
Edited by
Zuri Anderson
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Very few purchases are considered cheap these days, and car insurance is no exception. Rates can be high depending on where you live, what kind of vehicle you drive, as well as what kind of driver you are.
If you have been shopping around to find more affordable car insurance, you might want to ease up on the gas and switch gears to look at your credit score.
That’s right — raising your credit score can actually help you get a better car insurance rate. How? GOBankingRates breaks it down.
Credit and Insurance Are Linked
Matt Brannon, a data journalist at Insurify, shared data finding that show that drivers with poor credit pay about 76% more per month for full-coverage car insurance than those with excellent credit.
“That difference is even greater than the penalty for having a DUI, which raises premiums by roughly 65% compared to a clean record,” Brannon explained, noting that technically companies don’t use your credit score to set your rate, but use your credit history to create an insurance score as “a statistical tool insurers employ that tries to predict how likely you are to file a claim and how costly it might be.”
“If you’re a good driver and have a great credit score and drive infrequently, you’ll be paying the least amount of money with a telematics car insurance plan, which connects your car for tracking of driving behaviors and mileage,” added Fran Majidi, an insurance expert at Modotech.
Location Also Matters
An insurance score is based on credit score in most states and a higher credit score means a lower rate. That said, Brannon pointed out that some states, including California, Hawaii, Maryland, Michigan, and Massachusetts, have banned insurers from using credit history to set car insurance rates.
Because your insurance score is based partly or entirely on your credit history, improving your traditional credit score can help you qualify for lower premiums no matter where you live.
“If a person is struggling to make ends meet or is going through a particularly challenging time with finances, it’s a good idea to put all bill payments on a credit card rather than not paying on time,” Majidi recommended.
Keep Shopping Around
Raising your credit might not be enough to entirely get you a better rate on your car insurance, so it is important to keep looking for the best deal to fit your budget.
“Some insurers offer telematics programs that track driving habits and reward safe drivers with discounts, even if credit remains a factor,” Brannon commented. “If you drive infrequently, consider a usage-based policy, which ties your rate to how much you drive instead of a fixed monthly price. Some of these usage-based policies may not take your credit history into account. You should also regularly compare quotes to ensure you’re getting the best rate, no matter what your credit score.”
Majidi added that if you’re a good driver and have a great credit score and drive infrequently then “you’ll be paying the least amount of money with a telematics car insurance plan, which connects your car for tracking of driving behaviors and mileage.”
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