Will My Credit History Affect My Premiums?
March 29, 2023
Having a good credit history is an important part of financial responsibility and understanding credit history is key to unlocking access to the right insurance policies at competitive interest rates.
Unfortunately, many people don’t understand why it should matter for something like insurance. But the truth is your credit score can often play a role in the types of coverage you receive and the amount of premiums you pay.
It's worth taking a few moments to get educated on what exactly credit history is, and why lenders consider it when deciding whether or not an individual should be accepted for an insurance policy.
Most people understand that having a better credit score means lower interest rates, fewer fees, and more favorable terms when borrowing money, but this holds true for insurance policy purchases as well. In this blog post, we’ll cover how insurers use your credit history to assess risk and assign different rates from one policy holder to another.
Why Credit History Impacts Insurance Rates
Having a good credit history is one of the most important factors that can impact your insurance rates. Credit scores are used by insurance companies to assess ones risk when it comes to insuring an individual or family. The higher your credit score, the lower your rates will be. On the flip side, those with poor credit scores may find themselves facing significantly higher rates. According to Value Penguin, someone with a bad credit score could be looking at an increase of 70% or more in their annual insurance rates compared to someone with good credit. So, it can matter to anyone shopping an insurance policy.
It's also not just your credit history that can influence your insurance rates. Insurance companies will look at other personal factors like age, gender, occupation and driving history as well as the coverages, limits and deductibles you choose. So, it is important to take all these factors into account when shopping online for the best rate and coverages. By exploring how your personal financial decisions impact your ability to obtain favorable premiums in the future, you can start creating smart habits that will help you save money down the line. Ultimately, having a good credit score is still one of the most influential factors.
Tips to Find Good Deals with a Low Credit Score
Fortunately, there are proven strategies you can use to get better insurance rates even if you have a low credit score. Following the steps listed below can help ensure you get the best insurance deals despite having a bad score.
- Shop Around - A good way to start is by searching for insurers that don't check your credit history. You should also compare quotes from different insurers to find the best deal. Make sure you understand the coverage each policy offers and read online reviews to make sure the company you choose is reputable.
- Compare Coverage - When comparing quotes, make sure you’re looking at coverage that’s similar or identical in terms of liability limits and deductible amounts. Doing so will ensure an apples-to-apples comparison when it comes to the cost of the policies.
- Pay Your Premiums in Full - Paying for insurance premiums upfront may be a better choice than setting up monthly payments, as insurers may charge extra for the latter. It will also make your premium more affordable to reduce your overall cost of insurance.
- Maintain a Good Driving Record - Not only do you prevent having to pay for expensive tickets, but you can keep your insurance rates lower by proving you're a less risky driver. Additionally, if you have a claims-free or violation-free history, you may qualify for additional discounts.
- Improve Your Credit Score - One of the best ways to lower your car insurance rates is to improve your credit score over time. This can be done by paying your bills on time, reducing debt and making other financial changes. You may not see the results immediately, but you should eventually qualify to get better rates as a result.
Working with an experienced independent agent can help you identify an insurer that meets your needs without breaking the bank. Doing so will help you get the insurance coverage you need at a rate that fits within your budget.
Many insurance companies offer discounts on auto insurance based on more than one factor like your driving record, your vehicle’s safety features, and even loyalty rewards. A good starting point is to make sure you're doing what you can to keep your credit score in good standing, so you can take advantage of the best available rates. Contact Nsurance Nation to find out what discounts our insurers offer how to get the best deal possible despite having a lower credit score.
