In short, the answer is yes. Your credit score can affect your car insurance rate, particularly if you choose a monthly plan.
Very often, your score influences loan interest rates and credit card approval. So, it’s unsurprising that it should impact your car insurance, too.
How does is do so? Our guide explains.
Why does it affect my car insurance?
Essentially, your credit score can affect how high your car insurance rate is set at. And, there’s a good reason why.
Research shows that there is a link between how much a client costs an insurance firm and that client’s credit score. Most insurers use credit scores to determine the likelihood that a prospective customer will make a claim.
Through credit score checks, companies stand to save money. That’s why so many follow this process.
How does it work?
Most insurance providers use an auto insurance score. Typically, this draws on data contained within your credit report. And so, it works much like a credit score.
An insurer, however, is likely to analyse your credit history in a different way to a loan company. Some will check for risk elements – like CCJ’s (County Court Judgements). Others may want to view your current financial state.
A credit reference agency, like Experian, enables people to access their record easily. If you want to check it ahead of making an application for car insurance, you can.
Thanks to the Fair Credit Reporting Act (FCRA), nobody can access your credit score without your permission.
Can I improve my score?
Put simply, yes.
Stay up to date with all your regular payments, and you’ll be able to achieve a healthy credit score. Likewise, you may want to avoid reliance on credit too heavily, as this could damage your score.
If you want to get a second opinion, a financial advisor will be able to assist you in creating a solid financial plan – one that helps you to stay on top of your finances.
Insurers don’t just care about the likelihood of claims – they want to know that you’ll be a reliable customer, too.
If you use your car regularly, you aren’t alone – many of us do. The right insurer can cover you for maintenance and repair costs, making it easy to rectify any issues with your motor immediately and effectively. With a good credit score, you’re likely to be entitled to the best deals on the market.
Check your score regularly, and you could also learn to improve your financial management skills. And this won’t just benefit you in the car department – it may also help you to save money for the future.