Establishing credit is important because it may help you purchase a home or car. Calculating car insurance premiums is an often overlooked area where a strong credit score is essential. Here's a closer look at how your credit score may impact car insurance rates.
Yes, many auto insurance carriers analyze credit-influenced insurance scores while calculating premiums. Insurance companies look at credit scores to help predict future risks.
Credit-Based insurance scores do not measure your ability to repay a loan on time. They don't assess your income, job, or other information. Credit-based insurance scores look at your complete credit and payment history to determine the risk of covering you.
Auto insurance companies generally look at your driving history and previous claims to determine your auto insurance rates. You'll qualify for lower premiums with a good driving record, fewer previous claims, and an excellent credit-based insurance score. Insurers want protection against the likelihood that you'll file claims in the future. Research shows that people with good credit scores are better drivers and are less expensive for insurance companies to cover because they won't be involved in many accidents compared to other drivers.
Several variables may impact your credit score, including making timely payments and length of credit. The easiest way to improve your score is to make all your timely payments. Paying many bills late or having accounts in collection damages your credit score. Having an established history of credit is another great sign. Insurers may view you as unreliable if you're in the process of building credit. It's also important that you control your debt. While some debt is expected, having a large amount compared to your credit level is a bad sign.
Insurance carriers may make hard and soft inquiries on your credit report. Hard inquiries involve lenders making direct credit checks on your report. Multiple hard credit inquiries lower your credit score. Soft inquiries affect lenders’ pre-screening or reviewing of a few accounts. A soft inquiry also includes when you review your credit report. Soft inquiries don't impact your credit score because you and the company are the only ones who see the inquiries on your credit report.
You can find a free copy of your credit report through TransUnion or Equifax. It's essential to look over your credit report closely to see if anything needs to be corrected or unauthorized access. Insurance companies cannot adjust your credit report but can calculate your premiums based on the available information. You should change any errors on your credit report as soon as possible.
A good credit score will help you secure affordable car insurance. The Number 1 Insurance Agency team will assess your situation and help you find the coverage you want. Maintaining a strong credit score is pivotal in obtaining cost-effective car insurance. Our dedicated team at Number 1 Insurance Agency is poised to evaluate your circumstances and facilitate the discovery of the precise coverage that aligns with your requirements. Contact us today, and we will assist you in securing the optimal insurance solution for your needs.