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What Does My Credit Rating Have To Do With Purchasing Insurance?

Person driving a vehicle

Credit scores are based on several factors and are used to get a general idea of how the individual manages their financial affairs. An insurance score is different as it isn't used to predict creditworthiness but more so to predict risk. Insurers believe that people who have a poor insurance score are more likely to file an insurance claim. 

Insurance scores affect your auto insurance rate in a fairly predictable manner. The better your insurance scores are, the lower your auto insurance rate will typically be. On the other hand, if your insurance scores aren't doing well, your auto insurance rate will likely be higher. And heads-up: Insurance companies can vary in their use of "low score" and "high score" to refer to positive scoring.

Of course, credit-based insurance scores are only one of many factors that determine the rates you might be offered, and only if insurance companies are allowed to use them. In some states, insurers aren't allowed to use credit information to determine rates. Ask your AFI representative if you're concerned about how your credit rating may affect your insurance premiums.