Texas is similar to most other states in that your credit score and history will be used to set your insurance rates; only California, Hawaii, and Massachusetts avoid using credit scoring when rates are calculated. Drivers with better credit scores generally receive better rates than those with poor credit. Learning more about the way credit impacts your insurance rates will help you make the right decisions about your policies and to make financial choices that benefit you long term.
How is My Car Insurance Rate Determined in Texas?
Car Insurance is about risk – the riskier the insurer feels you are to cover, the higher your rates will be. Risk is determined in a variety of ways; some things you can easily change and some you can’t:
- Your driving record: Do you have a clean driving record without speeding tickets or worse infractions?
- Where do you park: Parking your car in a garage can cut your risk of theft
- Your demographics, including gender, age and more
- The car you drive
- Your credit score
Using your credit score as a way to determine risk is not a new idea; insurers have been doing this for two decades. A 2007 FTC study found a correlation between the amount a customer ends up costing an insurance company and that customer’s credit score; this link also supports the insurer’s decision to use credit when setting rates. A low FICO score could also indicate that the consumer would file more claims over time, according to the study.
While insurance companies do not use your FICO, your credit matters when it comes to setting insurance rates in the state of Texas. Each company has their own unique approach to scoring and the amount that your credit impacts your rate will vary.
Keeping Insurance Costs Down in Texas
What can you do if your credit is not very good? Even though Texas allows insurers to use consumer credit as a factor in determining rates, it is not the only factor. Different insurers calculate rates using different formulas; shopping around can help you get the best possible rate.
Working with an agent knowledgeable about insurance in the state of Texas of can help as well, particularly if you let them know your credit could impact your costs. A professional insurance agent can help you find the right policy for your needs, regardless of your credit.
Working to improve your credit over time by making on-time payments and paying attention to the other factors that make up your score can help you lower your costs over the long term as well.
While your credit score will impact your insurance rates in Texas, the right agent can help you find the best possible deal to protect your family and property. Contact us to learn more about the right auto insurance plan for you and for help finding the right plan regardless of your credit. We’re here to help you get the peace of mind you deserve at a rate you can afford.