How Your Credit Score Can Affect Your Insurance Rates

When most people think of their credit score, they associate it with getting approved for a loan or credit card. But did you know that your credit score can also impact how much you pay for auto, home, and even renters insurance? While this might come as a surprise, many insurance companies use a version of your credit information—called a “credit-based insurance score”—to help determine your rates.

What Is a Credit-Based Insurance Score?

A credit-based insurance score is not exactly the same as your regular credit score, but it uses similar information. Insurance companies use this score to predict the likelihood that you’ll file a claim. The idea is that people with higher credit scores tend to file fewer claims, while those with lower scores may file more.

Factors that may be considered include:

• Your payment history
• The length of your credit history
• Your credit utilization (how much debt you carry compared to your credit limits)
• New credit inquiries
• Types of credit used

Why It Matters for Insurance

Insurance companies use this score to help calculate your premiums. A strong score can mean lower monthly payments, while a poor score might lead to higher rates—even if you’ve never had an accident or filed a claim. This is especially common in states where it’s legal to use credit scores in underwriting insurance policies.

What Can You Do?

If you’re looking to save on insurance, improving your credit can help:

• Pay your bills on time
• Keep your credit card balances low
• Avoid opening too many new accounts at once
• Check your credit reports regularly for errors

It’s also a good idea to shop around for insurance quotes. Different companies weigh credit information differently, so you may find better rates by comparing your options.