If you want to lower the cost of your car insurance (and who doesn’t want to do that?), then you should work on your credit score. Drivers with credit scores above 750 save an average of $783 a year on insurance premiums, according to a study by CarInsurance.com. It turns out that people who are good credit risks are also safer drivers who live in safer neighborhoods, which translate into lower insurance risks.
If you’re not up on the credit score game, here’s a short course in how that process works. Credit scores can range from 300 to 850, and the average FICO credit score is about 680. People with scores above 750 represent the pinnacle of financial responsibility. Their diligence in paying their bills on time is an indicator that they are safer-than-average drivers. Because of that, they generally pay much less for car insurance. The study found that drivers with great credit can save almost $23,000 on car insurance during the course of their adult lives.
The average young adult between the ages of 25 and 34 with a clean driving record and full coverage pays $1,938 a year for auto insurance. Those with a credit score over 750 pay an average of $1,155, a savings of 40 percent, according to CarInsurance.com data. Drivers in other age brackets save similarly large amounts when they have good credit scores. Drivers under age 25, who often lack a credit file in their early financial lives, are penalized more for lack of credit history than they are for a low score. Once a person establishes a credit score, it has significant effects on insurance costs.
“That kind of money really adds up,” says Des Toups, senior managing editor of CarInsurance.com. “If you maintained a good credit score from the time you turn 25 to the time you retire, you’d save $22,815 over the average premium for people with similar driving records.”
