Your credit score affects insurance premiums. Here's what you need to know.
Credit-Based Insurance Scores
Insurance companies use specialized credit-based insurance scores, different from regular credit scores.
What Affects Insurance Scores
- Payment history
- Outstanding debt
- Length of credit history
- New credit applications
- Credit mix
How Much Does Credit Affect Rates?
Auto Insurance
Bad credit can double or even triple your premiums.
Example:
- Good credit: $1,200/year
- Poor credit: $2,400-3,600/year
Home Insurance
Premiums can be 50-100% higher with bad credit.
Renters Insurance
Less dramatic but still significant impact.
States That Limit Credit Use
Some states restrict credit use in insurance:
- California (auto insurance)
- Hawaii (auto insurance)
- Massachusetts (auto insurance)
- Michigan (auto insurance)
- Maryland (limited use)
Why Insurers Use Credit
Studies show correlation between credit and claims:
- Lower credit = more claims filed
- Payment behavior predicts risk
This is controversial and consumer advocates oppose the practice.
Lowering Insurance Costs with Bad Credit
1. Shop Around
Rates vary significantly between companies.
2. Ask About Discounts
Many discounts don't depend on credit.
3. Bundle Policies
Combine auto and home for savings.
4. Increase Deductibles
Higher deductibles mean lower premiums.
5. Improve Your Credit
As credit improves, rates can decrease.
6. Ask for Re-Rating
Request new rate after credit improvement.
Insurance Companies More Lenient on Credit
Some insurers focus less on credit:
- USAA (military)
- Progressive (varies by state)
- Local/regional insurers
Requesting Reconsideration
If charged more due to credit:
- Request the specific reasons
- Dispute any inaccuracies
- Ask about payment plans
- Shop competitors
Long-Term Strategy
- Improve credit over time
- Request re-rating annually
- Shop around regularly
- Maintain continuous coverage
Lower Your Costs
Better credit means better rates. Pioneer Credit Solution can help improve your credit. Call 1-888-271-2293.