Does My Credit Score Impact My Insurance Premiums?

December 16, 2014
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How does my credit come into play with my insurance rates you ask? Well, it comes into play in a huge way. Let's talk about the Auto Insurance side first.

When you call for an auto quote, the insurance carrier will run a proprietary financial responsibility check that is somewhat like a soft credit check to determine which credit bucket you will go in.

Here is how this works. Let's say an Auto Insurance carrier gives the best credit bucket with a range of 850 to 900 a score of "A", then second best credit score from 825-850 a "B", 800-824 "C" and so on. If you are married, one spouse may have a better credit bucket than the other so it is important to make sure the agent runs this under both spouses.

Then once your credit bucket is determined, the insurance carrier will then review your driving record to determine if the rate will need to change further from that point. This is where it can get crazy and not make sense to people in that you can have great credit and a not so good driving record and actually have a better auto premium than someone with average credit and a perfect driving record.

I'm sure you are wondering why Auto Insurance carriers place such a large emphasis on your credit. Well, insurance carriers based a tremendous amount of their rates on past performance. They can tell over time the claim frequency and severity of someone based on the kind of credit someone has. Statistically, people with worse credit file 2 to 1 claims over people with better credit.

Here is an example of how it comes into play. Someone who has really bad credit more times than not will tend to not get the maintenance done on their vehicle like they should. They may let the tire go bald because they can't afford to get them replaced. Driving down the highway at 70 mph, when you tire blows out can wind up in a serious accident. Or you may not get the brake light fixed or the windshield wipers replaced which can lead to higher claim activity.

Another reason revolves around payments being late. The administrative costs involved with people who pay their payments late is a huge cost of doing business. When payments are late, late notices have to be generated and then follow up letters have to be mailed when the payment has been received.

Regarding Homeowners Insurance, you can receive a 20% reduced premium with most carriers for having better than average credit. On the other side of the coin, if you have had a bankruptcy, foreclosure, a good percentage of the home insurance carriers will not write you until the above is 5 years or older.

The good news is dealing with an independent agency like Southern Insurance Group and let our professionals find your best pricing through our 50 plus insurance carriers. For quotes, give us a call at 352-243-9000 opt 1.


Tom Johnson - Owner

Southern Insurance Group

[email protected]