An auto insurance provider will determine your rates based on the extent to which your policy is considered a risk. Someone with a lot of moving violations will wind up paying a higher rate than someone with a clean driving record. Some factors that help insurers to determine these rates may be obvious, while others might be considered surprising.
One of those potential surprises: Your credit score does, in fact, affect what you pay for car insurance.
What Does Credit Score Have To Do With Auto Insurance?
When it comes to insurance rates, credit score may seem like an odd dot to connect. If you're wondering what the two have to do with one another, nobody is quite one hundred percent certain. However, available data shows that a lower credit score does tend to correlate with a higher probability of auto accidents.
As with many statistical correlations, all anyone can really do on this matter is speculate. It may be that people with better credit tend to drive safer, newer cars. People with better credit tend to be older and more experienced on the road.
Yet, this is all just speculation. The bottom line is that insurers have found that there is a correlation, so they're going to factor that in when determining your rates.
The Numbers Game
In a sense, insurance is all about playing the odds. We buy insurance on the chance that something might happen. And, in order to offer a fair rate, insurers have to determine the likelihood of that event transpiring. Without a crystal ball at hand, the best a provider can do is look at the numbers. Providers look at age, gender, whether you live in a rural or urban area and your driving history, to gauge the level of risk they are taking on by signing you to a policy.
There are some exceptions to the credit score rule: Hawaii, California, and Massachusetts have all barred auto insurance companies from factoring credit score into a driver's rates. Throughout the rest of the country, though, it's hard to blame insurers for wanting to use all the data available to them to make an informed estimate of a driver's level of risk.