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Most Texas drivers know that their driving record affects their car insurance rate. But many are surprised to learn that their credit score may have an even bigger impact.

The Credit Score Premium Gap

In Texas, a driver with poor credit pays on average 3 to 3.5 times the premium of a similar driver with excellent credit. That’s not a small difference. If a driver with good credit pays $150 per month, a driver with the same car, same driving record, and the same address but poor credit could pay $450 to $525 per month.

That can add up to $3,600 to $4,500 per year in extra premium, just because of a credit score.

Why Do Insurers Use Credit?

Insurance companies use what’s called a “credit-based insurance score,” which is different from your regular credit score but uses much of the same data. Insurers argue (and actuarial data supports) that there’s a statistical correlation between credit history and the likelihood of filing insurance claims.

Factors in your insurance credit score include: payment history on credit accounts, outstanding debt levels, length of credit history, new credit inquiries, and types of credit accounts.

What’s not included: your income, employment status, race, religion, gender, marital status, or nationality.

Texas Law on Credit and Insurance

Texas does allow insurers to use credit-based insurance scores in setting auto insurance rates. However, there are important protections. Insurers cannot deny, cancel, or refuse to renew a policy based solely on credit score. They must offer coverage regardless of credit. They cannot use credit as the sole basis for increasing your rate at renewal. You have the right to request a re-score if your credit has improved.

What You Can Do

Pay bills on time. Payment history is the single biggest factor in both credit scores and insurance credit scores. Even one late payment can have a significant impact.

Reduce outstanding debt. High credit utilization (using a large percentage of your available credit) hurts your score. Try to keep credit card balances below 30% of your limit.

Don’t open unnecessary new accounts. Each credit inquiry can temporarily lower your score.

Check your credit report annually. Errors on your credit report can unfairly raise your insurance rates. You can get free reports at annualcreditreport.com.

Ask your agent to re-quote annually. As your credit improves, your insurance rates should decrease. An independent agent can re-shop your policy every year to make sure you’re getting the best rate for your current credit profile.

Shop through an independent agent. Different carriers weigh credit differently. Some are more forgiving of lower scores than others. An independent agent can find the carrier that gives you the best rate for your specific situation.

The Independent Agent Advantage

This is where shopping through an independent agency really pays off. Some carriers weight credit heavily, others don’t. Some have programs specifically designed for drivers who are rebuilding credit. A captive agent can only offer one company’s rates. We can compare dozens.

At TAP Insurance, we work with 15+ carriers and regularly find significant savings for drivers at every credit level. Call us at (800) 666-2254 for a free quote.