Q: Is it true that my credit score can affect my insurance premiums?
I was talking to my dad the other day about car insurance, and he said that a person's credit score can be a factor in their rates. Is this true? I think my credit score is ok, but how do I know if I am getting the best deal? Why does my credit score even matter to an insurance company?
A: In most cases, yes, your credit score will affect how much you pay for your coverage. Insurance companies will be looking at two things when you contact them for rates. First, they will want to determine whether or not you present an acceptable risk. If so, they will then determine how much they will charge for your policy.
There are a number of factors that go into calculating your insurance rates and, in most states, your credit score is one of them. There is a very good reason for this. Countless studies have shown that there is a direct correlation between a low credit score and the frequency and severity of accidents, as well as policy cancellations due to non-payment. Because people with low credit scores tend to cost insurance companies more to insure, the increased rates are necessary to make up for it.
How much weight your creditworthiness carries will vary from one insurance carrier to the next, so it may prove quite beneficial to compare a number of different insurance quotes before selecting an insurance company. An independent insurance agent can make the process of comparison shopping easy on you.
It is worth noting that in a small number of states, your credit score cannot play a role in determining your premium costs. For example, in California, Hawaii and Massachusetts, your credit rating cannot legally influence your car insurance rates; and in California, Maryland and Massachusetts, it cannot affect your home insurance rates. If you have questions about how your credit rating will affect your rates, you can discuss this with your local Trusted Choice® insurance agent.