Jessica Sautter is a Content Writer for CarInsuranceCompanies.com with a Bachelor’s Degree from Eastern Michigan University in Elementary Education with a Major in Reading and a Minor in Mathematics.

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Chris Harrigan has an economic degree from Limestone College and an MBA from Clemson University. He previously managed auto insurance claims for Enterprise Rent-A-Car. Currently, he is using his business and insurance expertise to provide insurance data analysis and visualizations to enhance the user experience.

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Reviewed by Chris Harrigan
Former Auto Insurance Claims Manager

UPDATED: Sep 14, 2020

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Key takeaways...

  • Car insurance rates are not just based on you as an individual but also your age group and model of car
  • Studies have shown that credit scores strongly indicate how likely a person is to file a claim
  • All you should remember is a good credit score will help you get better auto insurance rates

Do all car insurance companies use credit scores when determining your car insurance premiums? Car insurance rates are calculated by risk formulas unique to each car insurance company.

A large number of factors make up the car insurance premium calculation but it all boils down to the likelihood of a driver incurring some kind of loss – whether that loss is from auto theft, a car accident, vandalism or any incident which requires a car insurance company to pay a claim.

Car insurance rates are not just based on you as an individual but also your age group, the make, and model of your car, where you live and many factors that are not unique to you but part of the larger risk formula.

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Table of Contents

Why Credit Scores Affect Car Insurance Rates

Studies have shown that credit scores strongly indicate how likely a person is to file a claim.

Someone with a poor credit score is proven to have a stronger tendency to file an auto insurance claim than somebody with good credit.

Industry experts predict that 90 percent or more of car insurance companies use credit scores as a factor in calculating premiums.

Many consumers argue this correlation between car insurance claims and credit scores, however, how exactly do you dispute this and make a difference?

All you should remember is a good credit score will help you get better auto insurance rates. A bad credit score will only hurt you.

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Why car insurance companies use credit scores?

You may be up against a wall to find a car insurance company who does not use credit scores and this is why car insurance comparison for people with poor credit is more important than ever.

Credit scores are not an exact science and some car insurance companies underwrite based on the entire profile of the report – not just the score.

You also should realize that some estimates show over 30 percent of credit reports have errors so before shopping for car insurance its critical you get a copy of your credit report to make sure any errors are corrected and the score fairly represents your credit history.

Since over 90 percent of car insurance companies use credit scores it’s highly doubtful you will find any right away simply by searching for general terms like “car insurance” or “car insurance rates.”

How to Improve Your Credit Score

You need to understand what a credit score is and what exactly is on your credit report before having any success in improving your score. Much like education is the key to the best car insurance rates credit education is the key to a better great score.

The first order is to get copies of your credit report and score from all 3 major credit reporting bureaus: Experian, Equifax, and TransUnion.

You are entitled to one free credit report a year, however, scores are not included so it’s worthwhile to always purchase your report. Review your credit report and note any errors disputing these with the credit bureaus.

Once your credit scores improve you certainly can get better rates and have a wider choice of car insurance companies to choose from.

Always remember to compare apples to apples including types of coverage, policy limits, and deductibles – never focus just on the premiums.

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