Can your credit score affect your car insurance premiums

We’re all looking for ways to make life cheaper. Especially as everything gets just… So… Much… More expensive. Like, who knew that milk and sugar could cost so much? Not us, that’s for sure. It’s been a bitter time, taking our coffees and teas black. But if you can decrease your expenses in other areas, maybe you can put heaping spoonfuls of the sugary good stuff back in your morning brew.

So, here’s an interesting and rather effective way to pay less for your car insurance, which is an essential cost (yes, car insurance is a must to prevent road-related mishaps turning into financial mountains) but 1 that you don’t have to cough up a kidney for… Maintaining a good credit score.

It makes sense, if you think about it, and we’re going to unpack how a good credit score could lower your car insurance premiums.

How your credit score affects your car insurance in the first place

Your credit rating affects a lot of important areas of your life, including how much you pay for car insurance. A key reason why this is so, is because your credit score indicates how much of a risk you are to service providers and credit lenders. It also tells them what you might get up to in the future, like if you’re the kind of person who’ll meet their repayments… Or not.

You could be charged a higher car insurance premium if you profile falls into a higher risk category.

Basically, the higher the risk a person is, the higher premiums will be, and in case you hadn’t worked it out, a low credit score shines a risky light on a person’s profile.

How a good credit score can lower your premiums

We started with the bad news, but there’s a glimmer of hope. While a low score can mean that you won’t be able to get car insurance, having a higher credit score can help lower car insurance premiums in South Africa.

Here’s how it works:

  • Be a responsible borrower: It’s not about having no debt, it’s about making payments on time and managing your debt well. Insurance companies view this as a positive factor and may offer you lower car insurance premiums compared to someone with a lower credit score.
  • It’s about perception: We use your score to assess the risk related to insuring you. A higher credit score = a lower risk of missing payments, which = lower premiums.
  • Fewer claims: There’s a lot of research to suggest that responsible financial behaviour is associated with responsible driving behaviour, making you less likely to file insurance claims.

All in all, a person with a better credit score is more likely to get lower car insurance premiums.

Get to know your score

A credit score is a 3-digit number that ranges from 0 – 999, and the higher your score, the better your rating. You can easily find out your score by visiting websites like TransUnion, where you can plug in a few details and download your credit score for free.

A breakdown of credit scores and what they mean:

  • 0 – 486 = Poor (AKA ‘eish’)
  • 487 – 526 = Unfavourable (AKA ‘oh no’)
  • 527 – 582 = Below average (AKA ‘that’s a bit low’)
  • 583 – 613 = Average (AKA ‘so-so’)
  • 614 – 680 = Favourable (AKA ‘you’re doing ok’)
  • 681 – 766 = Good (AKA ‘nice’)
  • 767 – 999 = Excellent (AKA ‘well, well, well’)

If you’re wondering what could bring your score down, it’s not as simple as just 1 thing. It’s usually a combination or a pattern of iffy money management, including missing your monthly payments, being late on payments, frequently applying for credit, having judgments issued against you, increasing your credit use, and, of course, being declared bankrupt.

Thankfully, you can improve a bad credit score. In fact, you can use your credit score to check what behaviour is bringing you down and take action by catching up on past-due accounts, avoiding missed payments, and that sort of thing. And then after a few months of good, credit score-upping behaviour, you can ask us to review your policy to see if this impacts your premium.

Of course, if you’re struggling to keep up with your royal payments and are worried about missing anything, then get in touch. WhatsApp or call us on 0860 50 50 50 or click here so we can call you back.

Psst… This blog provides general info only, and doesn’t count as financial or product advice from King Price or our legal and compliance experts. Remember, all our premiums are risk-profile-dependent, and T’s and C’s apply. Our most up-to-date KPPD (policy wording) can always be found here.

Our website T’s and C’s can be found here.

Can your credit score affect your car insurance premiums
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Can your credit score affect your car insurance premiums
There are lots of ways to bring down your costs. A really good way is to look after your credit score. Here’s how it could make your car insurance cheaper.
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King Price Insurance
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