Does My Credit Score Affect My Insurance Premium?

The simple answer is yes, credit scores can affect insurance premiums in most states, but not all. Insurance companies use your credit history to calculate an “insurance score” that estimates your risk of filing an insurance claim. People with lower credit scores may be considered higher risk and pay higher premiums. However, the impact of credit scores on rates varies by state and insurer.

Given the importance of your credit score, understanding how you can improve or maintain it is essential. Consider the following strategies…

Tips for Improving Your Credit Score

• Diversify your portfolio. If you don’t have much credit history to go off of, your credit score may be subpar. You may be able to build up your score by maintaining several different lines of credit, but avoid making too many inquiries in a short period of time.
• Keep up with payments. Perhaps the most critical factor in your credit score is demonstrating your ability to make timely payments. Consider setting up automatic payments to avoid late fees and penalties.
• Avoid excessive debt. While having some credit can be positive, maxing out credit cards or otherwise nearing your credit limits can harm your score.
• Refrain from closing accounts. Even if you’ve fully paid off a credit card, consider keeping the account open. This can keep your total credit limit higher, meaning you will use less of your total available credit with other cards or accounts.