These scores differ from the type of creditworthiness that lenders and banks consider when applying for a loan or credit card. Both look at similar factors, such as your payment history and debt, but weight them differently.
In a traditional credit rating model, “good” credit scores range from 690 to 719, but it is difficult to say what a “good” credit-based insurance value is as each insurer determines it. However, if you have a decent credit rating, the insurance version is likely to be on par.
Why credit history affects your auto insurance rates
Good credit probably means you can get cheaper rates. Why? Insurance companies say research shows that consumers with good credit-based insurance results are less likely to make expensive or frequent claims. Because of this, the insurers charge them lower prices.
These values, along with other factors such as age, gender, and car make and model, are used to calculate car insurance rates in the 46 states that allow the practice.
Despite its widespread use, many consumers are unaware that insurers use credit to set tariffs.
“People don’t understand that insurers see them as a changing risk profile,” said Amy Bach, executive director of United Policyholders, a nonprofit that advocates for insurance consumers. “They look at them much more deeply than a normal salesperson,” adds Bach.
