When most people think about their credit score, they connect it to getting a loan, buying a house, or qualifying for a credit card. But did you know your credit score can also impact what you pay for auto insurance? For Colorado drivers—and drivers across the country—understanding this connection can help you save money and make more informed financial decisions.
How Credit Scores and Auto Insurance Connect
Insurance companies use many factors to determine your auto insurance premium. Along with your driving record, vehicle type, and location, your credit-based insurance score can play a role.
This isn’t the same as the credit score your bank uses when approving a loan. Instead, insurers use a credit-based model that looks at information in your credit report (like payment history, length of credit, and outstanding balances) to predict the likelihood of future claims.
Studies have shown a statistical link between credit behavior and the likelihood of filing claims. From the insurer’s perspective, a higher credit score signals financial responsibility, which often correlates with fewer or less costly claims.
Why Insurers Consider Credit Scores
- Risk Assessment: Insurance is all about predicting risk. A driver with a higher credit-based insurance score is seen as lower risk.
- Pricing Fairness: Using credit helps insurers align rates more closely with the actual likelihood of claims, which can keep premiums more affordable for low-risk drivers.
- State Regulations: While Colorado allows the use of credit scores in setting rates, some states limit or restrict it. Always check your state’s insurance rules.
What This Means for Colorado Drivers
If your credit score is strong, you may qualify for lower auto insurance premiums. On the other hand, if your score is lower, you might see higher rates—even if you have a clean driving record.
That doesn’t mean you’re stuck. Improving your credit score can directly benefit your insurance rates over time. Some insurers also offer programs that focus more on driving behavior (such as telematics or safe driver discounts), which can help offset higher costs if your credit isn’t where you’d like it to be.
Tips to Improve Your Credit—and Potentially Lower Your Insurance Rates
- Pay bills on time – Your payment history has the biggest impact.
- Keep balances low – Using less than 30% of your available credit is ideal.
- Don’t open too many new accounts at once – Too many hard inquiries can lower your score.
- Check your credit report regularly – Correct any errors that may be dragging your score down.
Final Thoughts
Your auto insurance premium isn’t based on just one factor. Driving history, vehicle type, location, and yes—your credit score—all play a role. The good news? You can take steps to improve your credit score, which may help reduce your insurance costs over time.
At Conexus Insurance Partners, we believe in educating our clients so they can make the best choices for their coverage and budget. If you have questions about how your credit might be affecting your rates—or if you’d like us to review your policy for potential savings—our team is here to help.