Most people understand how credit scores impact loans and mortgages.But does a credit score affect car insurance rates?The short answer is yes.Many insurers use a “credit-based insurance score” as a factor in setting premiums.

This score helps predict the likelihood of a policyholder filing a claim.Even if you have a clean driving record, a low-risk vehicle, and are generally a safe driver, your premium could increase if your credit-based insurance score is low.Understanding this connection can help you manage your auto insurance costs more effectively.How Credit Scores Influence Car Insurance RatesA credit-based insurance score is different from a standard credit score, though it relies on similar information, including:While lenders use a credit score to judge financial behavior, insurers use a credit-based insurance score to predict claim risk.Importantly, personal information like religion, gender, and marital status cannot be used to determine your score.If your score is low due to missed payments or high debt, insurers may charge a higher premium.

Conversely, drivers with excellent credit may be eligible for lower rates.Why Insurers Use Credit ScoresYou might wonder why insurers consider credit when determining car insurance rates.Research shows that drivers with lower credit scores tend to file more claims or higher-cost claims.By using a credit-based insurance score, insurers can price risk more accurately and maintain balanced rates.Credit scoring for auto insurance is allowed in most states, including Minnesota, but some states limit its use.

These include:How Much Does Your Credit Score Affect Rates?The impact of your credit score on car insurance rates varies by insurer and location.According to Bankrate, on average, drivers with poor credit pay over 100% more for full coverage than those with excellent credit.Even improving your credit by just one tier can lower your insurance rate by an average of 54%, according to a study from The Zebra.The study also included specific data for Minnesota car insurance rates by credit score:Remember, your credit score is just one factor in determining your premium.

Your driving record, age, and the type of vehicle you drive also significantly affect rates.How to Improve Your Credit (and Potentially Lower Your Premium)Enhancing your credit can create opportunities to lower your car insurance costs.Here are practical steps to improve your score:Improved credit not only strengthens your financial position but can also reduce premiums over time.As your credit improves, insurers may raise your credit-based insurance score, potentially lowering your rate at renewal.Review Your Policy and Ask About OptionsIf you’re still unsure how your credit score affects car insurance rates, your agent can help.

They can explain how your score factors into your premium and suggest ways to offset higher costs, such as bundling policies, maintaining a clean driving record, or taking advantage of discounts.While credit does influence insurance rates, it’s only one part of the equation.Other factors like age, driving history, and vehicle type also matter.Regularly reviewing your coverage can help ensure you’re getting the best rate and filling potential gaps in protection.Contact Atlas Insurance Brokers today to review your policy and explore ways to lower your car insurance rate.