Auto insurance companies use many different variables to assess how much of a risk people are to insure. These factors determine the price you pay for coverage. In 2018, Wisconsin drivers’ credit histories caused their coverage rates to fluctuate up to 143%. As such, it’s important to understand the correlation between credit and policy premiums if you want to lower the cost of coverage.

How Credit Is Used to Calculate Coverage Costs

While your credit score is typically used to measure your creditworthiness, insurers view it as a way to predict how likely you are to file a claim. According to the Federal Trade Commission, a person’s credit history is an effective way to evaluate their risk level. Those with higher scores are generally regarded as less risky, which is rewarded with lower auto insurance rates. 

To determine your rating, providers will pull your credit report from one or more of the reporting bureaus and run the data through proprietary algorithms to come up with separate insurance scores. This is what they use to calculate your coverage costs. 

How to Improve Your Credit Score

Fortunately, raising your credit score will help you secure lower auto insurance premiums. If your rating is on the lower end, work on improving it by making sure all your bills are paid on time each month.

You also want to keep your debt-to-income ratio low, so start reducing your credit card balances as much as possible. Limit how often you apply for new lines of credit, as these can lower your score.

Don’t forget to check your credit report often and have any errors promptly fixed to prevent negative impacts on your score.

If you’re searching for reliable and affordable auto insurance, reach out to Edwards Insurance Agency. They’ll help you compare policies and prices from multiple carriers to ensure you’re getting maximum protection at the best rate available. For more than a century, they’ve been entrusted to provide residents in and around Sparta, WI, with high-quality coverage solutions and personalized service. Call (608) 269-4512 to request a quote, or visit them online to learn more auto insurance.