The Surprising Reason You Might Pay More for Car Insurance — and What to Do About It

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The good news is that it’s something you can work on. 

If you own a car, you’re no doubt aware that insuring it is a large expense. And there are different reasons why your auto insurance company might charge you a higher premium than expected.

For one thing, if you’re a fairly new driver, you might come off as a riskier person to insure. So your premium costs might reflect that. If you have a history of moving violations, that’s apt to impact your auto insurance costs, too. After all, if you’ve been caught speeding more than once, it might lead your car insurance company to believe you don’t really practice safe driving habits. And it might jack up your premiums as a result.

But there’s another factor that could explain why you’re paying more for car insurance — and it’s one that might catch you off guard.

How’s your credit?

The average credit score among U.S. consumers was 714 in 2022, according to Experian. That’s considered a good credit score to have, though there’s room for improvement, as credit scores go as high as 850.

But what if your credit score is considered poor? If your score really isn’t in such good shape, you may not be surprised if a lender charges you a higher interest rate on a loan or mortgage. But you may be shocked to learn that poor credit could lead to higher auto insurance rates.

Now, if you feel this doesn’t make a lot of sense, you’re surely not alone. It stands to reason that you might be charged a higher interest rate on a loan when your credit is poor because a lower credit score speaks directly to your tendency to manage your debts and pay your bills. But when you get auto insurance, you’re not borrowing money; you’re paying money in exchange for coverage.

Still, some auto insurance companies regard poor credit as a general risk factor. So even if you have a solid driving record, if your credit score isn’t so great, you might get stuck paying higher premium rates.

How to boost your credit score

Boosting your credit score could do more than just help you save money on auto insurance. It could also make it easier for you to borrow money in a more affordable manner.

If you want to raise your credit score, one of the most important things to do is pay all of your bills on time. You should also, if possible, try paying down some credit card debt if you have a large balance relative to your total spending limit.

Checking your credit report for errors is another good way to potentially improve your credit score. If you spot a mistake and get it corrected, your score might rise pretty quickly.

It may seem strange that your credit score would dictate what premium rate you’re charged by your auto insurance company. But alas, that’s how many insurers work. So if you want to spend less to insure your vehicle, work on improving your credit score.

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