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All You Ever Wanted to Know About Insurance

Does My Credit Score Affect My Insurance Premiums?

You may be aware of how your credit score will affect purchasing a home or taking out a credit line, but what about your insurance? If you've ever wondered how your credit score impacts your insurance premiums, look no further. 

How Does Your Credit Score Affect Insurance?

Credit score vs. insurance score:
Credit score: A credit score is a measure to determine your credit risk to potential lenders. Your credit score will factor in your debt-to-income ratio, and if you pay your bills on time.
Insurance score: Your insurance score is a non-inquiry score that takes into account your credit score. The carriers will use your credit score to determine if you are more likely to file a claim or miss a payment.

Does an Insurance Score Affect Your Credit?

As you just found out, your credit score does impact your insurance score. Which, in turn, affects your insurance premiums. However, Botma says, "Your insurance score has zero impact on your credit. In fact, it doesn't even qualify as an actual inquiry when your insurance score is run." If you are in the market to purchase a home or a vehicle and worry about your insurance score affecting your closing, don't be.

Your insurance score is used only by insurance carriers to determine premiums. Some other items that determine your insurance premiums are as follows:

  • Your age
  • Your loss history
  • Where you live
  • The year, make and model of any vehicles being insured
  • The age and replacement cost of property being insured
  • Your motor vehicle records
  • How many years you've been insured
  • If you've had any lapses in coverage
  • How much coverage you choose
  • Any credits or multi-policy discounts

Does Your Credit Score Affect Car Insurance?

The same way that your credit score determines your insurance score and thus determines your premiums, yes. Again, if you have a bad credit score, carriers take that into account and raise premiums. 

On the flip side, if your credit score is fantastic, you will get more competitive rates. Car insurance premiums have risen in the past decade. This is partially due to the number of drivers on the road and the claims that have been filed. With more people, more accidents occur. The factors that impact your auto insurance premiums are good to know so you can be prepared.

Car insurance rating factors:

  • Your insurance score
  • Your location
  • The year, make, model, and value of your car
  • Your claims history
  • The number of drivers in your household
  • The motor vehicle reports of all household drivers
  • If your car insurance has ever lapsed

Does Your Credit Score Affect Homeowners Insurance?

Yes. Botma says, "Your credit score will affect how much you pay for insurance. The insurance carriers are all about risk minimization, and the riskier you appear, the more they'll charge. 

"All you have to do is stay true to your commitments. If you say you are going to pay a loan or a bill each month, make sure you do. We advise all our clients to take a look at their financial commitments and consistently pay them until they are paid off. This will increase your credit score over time and may even help with your insurance premiums."

Other homeowners insurance rating factors:

  • Your address
  • The year, quality, and materials of your home
  • The replacement cost of your home
  • The pets you own
  • The value of personal belongings you own
  • Your claims history
  • If you have any other structures and their values
  • Policy discounts and credits that may apply

Your home is unique and rated accordingly. What you pay for homeowners insurance won't even be the same as your next door neighbor. It's important to remember that each policy you own is customized and specific to you.