How Your Credit Score Affects Your Insurance

One or two unpaid bills might not seem to be a big deal to you, but they can be a huge deal to your insurance provider, who checks your credit score and history before offering you any insurance policy.

If you’re unsure how these two things are connected, let’s take a detailed look at how credit score affects insurance.

What Makes Up Your Credit Score?

Knowing what your credit score is made up of is the first step to understanding how it’s related to your insurance policies. Your credit score includes:

Past Payment History

Past payment history refers to your credit bills. It includes how many bills you have paid, how many are left, if they were paid on time, etc. Past payment history’s weightage in your credit score is the highest, which is 35%.

Amount of Credit Owed

This includes the accounts you hold and how much credit limit you have on these accounts. Credit owed makes up 30% of the credit score.

Credit Repayment Length

This part indicates how long you have held your credit accounts. Credit repayments make up 15% of the credit score.

Credits Taken Up

Credits taken up refer to new accounts or credit lines that you’ve recently opened. This makes up 10% of the credit score.

Types of Credits Taken Up

This includes the different types of credits you’ve already taken up, like mortgages, credit cards, loans, etc. This also makes up 10% of the credit score.

All these factors make up the credit score, indicating how responsibly an individual uses their credit. The credit score affects insurance policies in certain ways. Here’s how:

Getting an Insurance Policy

Your credit score affects what insurance policy you get. Having a bad credit score doesn’t mean you won’t qualify for insurance; it means you won’t get your desired policy. You may have to explore your options or negotiate with insurance companies and convince them to get your desired policy. However, if you have a good credit score, you won’t have any problems like these.

Getting Lower Premiums

The insurance premium is the amount of money your insurance will cost you. Getting an insurance policy is not the end of the process. You also have to get lower premiums to afford your insurance policy. The better your credit score is, the lower premiums you’ll get.

Negative entries on your credit report can result in higher premiums. For example, a minor traffic violation or an unpaid parking ticket can lead to a higher premium for your auto insurance policy!

If you’re looking for desirable insurance policies with reasonable premiums, Western Mass Auto Insurance can help you.

Western Mass Auto Insurance is a trusted insurance provider in Springfield and offers multiple types of insurance policies, including auto insurance, home insurance, life insurance, renter’s insurance, and more.

Reach out to us now for more details.