If you and your friend drive the exact same car—the same make, model and year, will you be paying the same for auto insurance? The answer is most likely no.
Why is that? That is because auto insurance companies take in a lot of factors to determine the premium of your car insurance, in addition to the type of car that you drive. Read on to find out what will affect your car insurance premium:
Rating Factors that Determine Car Insurance Premiums
- Driving history
- Location
- Claims history
- Annual miles used
- How your vehicle is used (work or personal reasons)
- Your occupation
- Credit score
Watch the video here:
How Credit Score Affects Car Insurance Costs
Yes, your credit score can and likely does influence how much you pay for your car insurance. So if you have a few late payments on your record or you have declared bankruptcy in the past, all of these actions can lead to you paying higher premiums for your auto insurance today.
Nine out of 10 car insurers utilize a credit-based insurance score when calculating how much you need to pay for auto insurance. They look at the length of your credit history, i.e. how long you have then borrowing and paying back loans, what types of credit you currently have open (mortgage, student loans) as well as your payment history, including delinquencies and leg pain
If you were to finance a car, the financial institution would consider your creditworthiness based on how likely you are to pay off your loan. Car insurers, on the other hand, utilize the factors in your credit score to see how much of a liability you will be for making claims.
While your auto insurance representative may not openly tell you that you are paying more because of a poor credit score, it is likely that if you raise it your premiums will go down. The Federal Trade Commission is an excellent resource to read more about consumer credit and find ways to improve your credit score.
Get a credit report to review your credit history and find out if you need to take steps to improve your credit. Click here to get a free credit report.
Often times, if your debt to income ratio is too high, it will negatively affect your credit score. To pay off a high-interest loan, click here.
Finally, shop around for car insurance quotes to find the most affordable policy for you. Click here to put in your information once and receive various quotes from different auto insurance companies at the same time to help you make the best choice.
