How Your Credit Score Impacts Your Insurance Policy

Credit scores are used by lenders to determine a particular borrower’s risk factor, but did you know your credit score impacts your auto insurance, homeowner’s insurance, and life insurance premiums? A credit-based insurance score is different from a regular credit score as it’s designed to rate which policy risk category the insured individual meets.

Types of Credit Scores Used By Insurance Companies

Insurance companies weigh several factors when determining which policy and coverage limit to offer to someone seeking insurance. Insurance companies use FICO and LexisNexis scores to determine an insurance-based credit score. Credit-based insurance scores allow companies to assess the likelihood that someone will file insurance claims, costing the company more money than they would collect in monthly premiums.

Auto Insurance Premium Risk Factors

Auto insurance providers review credit reports in addition to the following criteria when determining monthly premium rates:

  • Driving record - maintaining a clean driving record reduces the risk of paying more in monthly premiums.

  • Location - certain locations can have an increased risk of vehicle theft, vandalism, and accidents, all of which could impact the auto insurance rate.

  • Demographics - Age, gender, and marital status are reviewed when determining auto insurance premiums.

  • Vehicle type and features - Certain vehicles will cost more to insure. High-end sports cars and luxury vehicles will cost more to insure than SUVs and pickup trucks. Safety features on the car will decrease insurance costs, such as having a security alarm on the car, daytime running lights, and lane-departure warning.

How to Improve Credit-Based Insurance Scores

Like personal credit scores, you can improve your credit-based insurance score. Use these tips to reduce your risk factor and obtain proper coverage amounts with lower monthly premiums:

  1. Make monthly payments on time. Mortgage loans have a more considerable impact on your credit rating. Missing a mortgage payment can reduce your credit score quickly.

  2. Become a safe driver. Reduce your rates by following proper traffic laws. Too many speeding tickets, accidents, DUIs, and other driving issues can reduce your ability to obtain fair insurance rates.

Just Protect Insurance can help you obtain fair insurance rates. Get an instant insurance quote today by filling out our simple qualification questionnaire.