How does my credit score affect my insurance policy?

How does my credit score affect my insurance policy?

Many auto insurance companies use a credit-based auto insurance score to help them decide whether to take you on as a policyholder, as well as the premium you’ll pay if they do. While it’s only one of many factors that go into determining your rate, having good credit can help you save money.

Credit-based insurance scores are different from the credit scores that most people are familiar with—the credit scores that FICO® and VantageScore® calculate for use by creditors. While credit scores try to predict the likelihood that a consumer will be 90 days late on a payment in the next 24 months, credit-based insurance scores try to predict the likelihood that a consumer will file insurance claims that will cost the company more money than it collects in premiums.Auto insurance companies can, and often do, consider your credit history or use a credit-based insurance score before offering you coverage. It’s only one piece of the puzzle, however, as insurance companies are generally prohibited from making a decision solely based on your credit.Some states—including California, Hawaii, Massachusetts, and Michigan—strictly limit or entirely prohibit insurance companies’ use of credit information in determining auto insurance rates. In these states, your credit score won’t affect your insurance rates no matter how good or bad it is.
  • Posted by admin
  • On October 15, 2020
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Sheppard Benefits Group, PC
PO Box 297
Lewes, DE 19958
Direct: 908-892-0656
Fax: 856-494-1977