Your credit history is a key indicator of your financial health and reliability to lenders. It plays a significant role when you apply for loans, credit cards, or mortgages. But did you know that your credit history can also impact your auto insurance premium? At Infinity Insurance Agency Inc. (IIA), we understand the importance of maintaining a strong credit history as it can impact credit-based insurance scores. We are dedicated to providing our customers with valuable information to help them manage and improve their credit history, which can help them get the best possible rates on their auto insurance.
An insurance company can only use your credit-based insurance score as one factor in its underwriting process. It will be considered with several other factors that vary by insurance type.
For example, with auto insurance, other factors could be your ZIP code; the age of the operators; the make, model and age of your car; and even the miles you drive annually. You can ask your agent or insurance company if a credit-based insurance score was used to underwrite and/or rate your policy and in which risk category you were placed after you receive a quote.
How is a Credit-Based Insurance Score Calculated?
It’s important to understand how your credit-based insurance score is calculated. There are several different companies that create credit-based insurance score reports for insurers to use. FICO, for example, looks at five general areas that it believes will best determine how you manage risk. This is the breakdown of what it considers and how much the information generally weighs in figuring your credit-based insurance score:
- Payment history (40%) — How well you have made payments on your outstanding debt in the past
- Outstanding debt (30%) — How much debt you currently have
- Credit history length (15%) — How long you have had a line of credit
- Pursuit of new credit (10%) — If you have applied for new lines of credit recently
- Credit mix (5%) — The types of credit you have (credit card, mortgage, auto loans, etc.)
Does my Credit History Affect Car Insurance?
If you live in a state where a credit-based insurance score is allowed to be used, some insurance companies may use a credit-based insurance score to complete a quote for a premium. Applying for car insurance does not affect your credit history like it would when applying for a car loan. Agencies or insurance companies that check scores usually do it as a soft hit rather than a hard credit check. A soft hit does not usually affect your credit score, while a hard credit hit can affect it.
Can I get Car Insurance with Bad Credit?
Yes, you can. Your rates may be higher though. In certain states, some insurers might ask for credit history. Our agents will advise you if this is something required. If you’re not sure which coverage to consider, our website’s Knowledge Center can provide more information to help guide you.
Can I get car insurance with no credit history?
IIA can help find insurance policies for drivers with little to no credit history!
How do I improve my credit-based insurance score?
You can improve your credit-based insurance score by:
- Making payments on time. Pay bills, taxes and fines/fees as agreed. If you are behind on payments, catch up and stay current. Keep balances on credit cards as low as possible.
- Many insurers will reconsider a change in premium if a policyholder experienced an extraordinary life circumstance like a catastrophic event, job loss or serious illness.
IIA offers insurance options for those with so-called good or bad credit-based insurance scores. IIA agents ask you questions so you can choose the policy that best fits your financial status.
Call IIA today at 1-855-478-3705 to speak to our agents for a free quote.