How Credit Score Affects Your Insurance Rate (and What You Can Do About It)

When you think about what impacts your insurance rates, you probably think of things like your driving record, the type of car you drive, or even your age. But there’s another factor that might surprise you: your credit score.

Yes—just like it affects your ability to get a loan or a good interest rate on a mortgage, your credit score can also influence how much you pay for auto or home insurance. In this blog, we’ll break down why that is, how it works, and—most importantly—what you can do to improve your situation.

Why Do Insurance Companies Use Credit Scores?

Insurance providers use something called a credit-based insurance score to help predict how likely you are to file a claim. Studies have shown a statistical relationship between credit habits and the likelihood of insurance losses.

Here’s what they’re looking at:

• Your payment history
• How much credit you’re using (credit utilization)
• Length of credit history
• Types of credit in use
• New credit activity (like recent credit inquiries)

Unlike your actual FICO score, this insurance version is used only for risk assessment—not lending. But it works similarly.

How It Impacts Your Rate

If you have good to excellent credit, you could be rewarded with lower premiums. But if your credit score is low or has taken a hit recently, you might see significantly higher rates—even if you’ve never had a claim or ticket.

For example:

• A driver with excellent credit could pay hundreds less per year on car insurance than someone with poor credit.
• Some states cap or prohibit this practice, but in Pennsylvania, it’s still legal for insurers to consider credit as a factor.

What You Can Do About It

The good news? You’re not stuck. Here’s how you can take control:

✅ 1. Check Your Credit Report
Get your free annual credit report at annualcreditreport.com. Look for errors, fraud, or outdated info—and dispute anything that’s incorrect.

✅ 2. Pay Bills On Time
Even one late payment can hurt your credit. Set up automatic payments or reminders to stay on top of due dates.

✅ 3. Reduce Credit Card Balances
Aim to use less than 30% of your available credit—lower is better. This can improve your score relatively quickly.

✅ 4. Avoid Opening Too Many Accounts at Once
Too many recent inquiries can drag down your score. Space out applications if possible.

✅ 5. Talk to an Independent Agent (Like Us!)
Some insurance companies weigh credit more heavily than others. At Mars Tag & Insurance, we shop across multiple carriers to find the best rate for your unique situation, regardless of your score.

🤝 Let’s Review Your Policy TogetherNot sure if your credit score is hurting your insurance rate? We can help. Contact us today for a free, no-obligation policy review. We’ll walk you through your options and help you find coverage that fits your needs—and your budget.

By Mars Tag & Insurance Agency – Serving Philadelphia with care & expertise