These scores are different from the type of credit score that lenders and banks look at when you apply for a loan or credit card. Both look at similar factors, such as your payment history and how much you owe, but rate them differently.
In a traditional credit scoring model, “good” credit includes scores from 690 to 719, but it is difficult to say what a “good” credit-based insurance score is because each insurer determines it. himself. Still, if you have a decent credit score, the insurance version is probably on par.
Why Credit History Affects Your Auto Insurance Rates
Having good credit probably means you’ll get cheaper rates. Why? Insurance companies say research shows consumers with good credit insurance scores are less likely to file expensive or frequent claims. For this reason, insurers charge them lower rates.
These scores are used in tandem with other factors such as age, gender, make and model of the car to calculate auto insurance rates in the 46 states where the practice is permitted.
Despite widespread use, many consumers are unaware that insurers use credit to set rates.
“People don’t understand that insurers see them as a walking risk profile,” says Amy Bach, executive director of United Policyholders, a non-profit organization that advocates for insurance consumers. “They look at them a lot more deeply than a regular supplier would,” adds Bach.