With interest rates at historic lows, many people are refinancing their homes to save money, and are being rewarded for their good credit with the lowest possible rates at the same time. This doesn’t come as much of a surprise to anyone. But did you know that your credit score also influences your car insurance premium?

Insurance companies look at more than just your driving history and what kind of car you drive when calculating your premium. Factors like what zip code you live in, your age, and your insurance history are just some of the things insurance carriers look at when calculating your premium. However, one of the most important and most often overlooked variables is credit.

Simply put, with modern, technology-based car insurance, the better your credit, the better your premiums will be.

Why is this?

There are a few reasons:

1. Statistically, insurance carriers have paid out fewer claims to policyholders with higher credit than those with poor credit.

2. Those claims that they do pay out to those with good credit tend to be for smaller amounts, on average.

3. Finally, your credit score is an indicator how responsible you are, in the eyes of the insurance company. They see a higher score as representative of someone who is more careful, and therefore less of a risk.

You don’t have to have perfect credit to get affordable insurance, but the better it is, the better your rates will be! If your credit isn’t as great as you’d like it to be, there are a few things you can do to help improve it.

1. Pay your bills on time every month. Late or missed payments will drastically impact your credit score, especially if you have multiple instances of late payments.

2. Limit the number inquiries into your credit. When you apply for a credit card, a loan, or another form of credit, financial institutions will perform a “hard” credit check on your credit history. Having these in your recent history, particularly having several in row, will bring your scores down. A “soft” inquiry, like when you check your own credit, or when an insurance company checks it, does not impact your credit score.

3. Check your own credit! The three major credit reporting agencies, Equifax, Experian, and TransUnion, are required to provide you with a copy of your report once a year. This is not your score, but will show you the factors contributing to your score, which is a great guide to improving it! This is also the first step to disputing false entries. There could be inaccurate information on that report that is hurting you unnecessarily.

4. If you have a thin credit file, adding a service like Experian Boost can help build your credit by adding on time payments for streaming services and subscriptions to your credit file. This program is free, and can be a benefit to people with limited credit history.

5. Open a secured, no annual fee credit card. This is also a tip for people with limited credit history. Having a card to help establish credit history is a good step toward building a good credit profile.

If you already have a great credit score, make sure you’re being rewarded for it with good car insurance rates! If you’re not there yet, that’s okay. You can use the tips above to work on improving your score, and reap the rewards, and not just on your insurance rates!