1. Your Credit-Based Insurance Score
In many places, insurers use a version of your credit history, often called a credit-based insurance score, as one of the more heavily weighted factors in calculating your premium. This score is built using similar data to a traditional credit score, including payment history, credit utilization, and length of credit history, based on statistical research showing a correlation between financial responsibility and claims frequency.
This scoring model typically weighs factors like the length of your credit history, the diversity of your credit accounts, and how close your balances sit relative to your credit limits, producing a distinct number that some insurers refer to internally as an insurance risk score rather than a traditional credit score.
Why it matters: Two drivers with identical driving records can pay noticeably different premiums purely because of a difference in their credit-based insurance score. Some studies have found this gap can be as significant as the difference between a driver with a spotless record and one with a recent at-fault accident, which surprises many people who assume only driving behavior matters. What you can do: Pay bills on time, keep credit card balances low, and check your credit report periodically for errors, since even small mistakes on your report can quietly inflate your insurance premium.