• Fri. Dec 1st, 2023

Car Auto Insurance

It's My Car Car Auto Insurance

How Your Credit Score Can Help You Save On Car Insurance

What we’ll cover

What is a credit-based auto insurance rate? 

Credit score vs. credit-based insurance score

These two terms sound the same, but they each are trying to predict something different about your future. A credit score is the starting point for lenders such as banks to determine how likely you are to pay back a loan (such as a mortgage or a credit card bill). A credit-based insurance score helps insurance companies predict whether you’ll file a claim.

While both scores take into account a lot of the same history, they weigh things differently. For example, a report from data analytics company FICO revealed that payment history is more important for the credit-based insurance score than it is for the credit score.

In general, you don’t need to worry too much about the differences between how the two scores are calculated. If you have a good credit score, your credit-based insurance score is likely also in good standing.

How does a low credit score affect car insurance rates? 

Just like a ticket or an accident, a low credit score can drive up your car insurance rate. In most states, your insurance company can check your credit score each time you renew your policy. If your credit score plummets after you initially enroll with a certain company, that lower score could come back to haunt you in the form of increased rates when you renew your policy or switch providers. However, insurance companies can’t change your rate in the middle of your policy’s term.

Drivers with poor credit (a credit score under 580) pay 97% more, on average, for full coverage car insurance premiums than do their counterpart drivers with exceptional credit (a credit score above 800), according to a study by Bankrate. The study summarizes that that’s an average difference of more than $1,700 every year.

Don’t be thrown off by thinking you have to have perfect credit to save some cash on car insurance. Moving up the credit score ladder even a rung or two can potentially save you hundreds. By getting your score up from poor to average, for example, you can save 20% (an average of about $600 annually), according to car insurance comparison site The Zebra

How can I lower my car insurance rates despite my credit score? 

Geico Auto Insurance

  • Cost

    The best way to estimate your costs is to request a quote

  • App available

  • Policy highlights

    Geico coverage and services are available in all 50 states and the District of Columbia and there are 16 different types of discounts available. In addition to the standard coverage options, Geico offers various optional add-ons, such as emergency roadside assistance, rental car reimbursement and mechanical breakdown insurance.

If you’d rather stick with your current insurance company, there are still a few ways you can save. One is by reassessing your coverage. If you have full coverage car insurance — a bundle that includes liability coverage, collision coverage and comprehensive coverage — you’re the most covered you can possibly be on the road.

However, full coverage car insurance likely costs way more than the minimum coverage required by your state. If you’re an especially careful driver, you could save by choosing a less comprehensive coverage plan. Be careful though, because using minimum coverage could come back to bite you should you be at fault in an accident. 

Simply not getting in accidents helps bring your car insurance payments down, and insurance companies usually reward less-risky customers. Do some research and find out if your insurance provider offers a usage-based car insurance program, which could reward you for safe driving. If you opt into one of these programs, your insurance provider will begin measuring your speed, acceleration, braking and mileage. Money.com reports that these programs could save you 20-30% in premium costs, simply by driving safely. 

While you’re researching usage-based insurance programs, keep an eye out for other discounts that your insurance provider may offer. Some companies charge fees for paying each month, so you could save some money by paying your premium as one lump sum. Paying upfront could save you as much as 12%, according to The Zebra. However, this is a large expense, and you may not have a couple thousand dollars in cash ready to make this lump payment.

Most large insurance companies, like Nationwide and Progressive, also offer discounts for bundling your homeowners or renters insurance with your auto insurance. 

Nationwide Homeowners Insurance

  • Cost

    The best way to estimate your costs is to request a quote

  • Maximum coverage

  • App available

  • Policy highlights

    Policy covers home and property damages caused by theft, fire and weather damage. It also covers personal liability, loss of use and unauthorized transactions on your credit card

  • Does not cover

    Water damage, earthquakes, flood insurance, identity theft, high-value items, rebuilding home after loss (these can all be purchased as add-ons for extra coverage)

Progressive Renters Insurance

  • Cost

    Starts at under $1 a day; premium depends on the coverage amount you choose

  • Maximum coverage

  • App available

  • Policy highlights

    Policy covers personal property damage or loss, loss of use of your rental, accidental harm caused to another person or damage to their property, injury to another person that occurs in your rental space

  • Does not cover

    High-value items like jewelry; additional coverage would be needed for such items

How can I raise my credit score? 

Experian Boost™

On Experian’s secure site

  • Cost

  • Average credit score increase

    13 points, though results vary

  • Credit report affected

  • Credit scoring model used

Results will vary. See website for details.

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*Results may vary. Some may not see improved scores or approval odds. Not all lenders use Experian credit files, and not all lenders use scores impacted by Experian Boost.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.


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