Maybe you’re a young driver without a credit card or loan history. Maybe you’ve avoided credit cards because, like me, you’re pathologically afraid of owing money. Or maybe you weren’t scared enough, tanking your credit early in life. Whatever the situation, credit score remains a critical determining factor in how more-traditional insurance companies determine your rate. If you’re thinking about purchasing or financing a car – take a look at your credit score first. A few months of credit rehabilitation could save you thousands of dollars in insurance premiums down the line.

Credit scores – also known as FICO scores – fall between 300 and 850. They’re generated from a large sample of variables to condense your “creditworthiness” down to one metric. Essentially, it shows lenders how reliable you are with money and paying debts. If you have a high score – anything above 750 – you’ve been paying bills in full, on time, for years and years. Lenders feel that they can trust you with access to more credit, and reward you with lower interest rates on any debt you carry.

In this case, a higher score also means access to more and better insurance.

But if you have a low credit score or no credit history, it can make for a difficult existence. Modern society runs on credit. If you want to take a flight, book a hotel room, or make any large purchase, you’ll be asked to supply some type of credit reference. And those 300 points you get for just being alive? They don’t go very far in proving your creditworthiness. It’s not impossible to access credit with a low score. It’s just, until you’re able to improve your credit score, you’ll likely only be offered very high-interest rates on loans. And be prepared to get rejected outright when applying for certain things, like insurance policies or mortgage(s).

But why, exactly, do car insurance companies want to see your credit score? You’re not borrowing money from them, so why do they ask to see it?

They do it to gauge risk.

Study after study has shown that people with lower credit scores are more likely to file a claim, tend to file many claims, and have more expensive claims. Not the case for high-scorers. And statistical insights like that are an insurance company’s bread and butter. By having a mathematical equation with lots of variables, they can determine just how much of a risk you pose to them with a high degree of granularity.

Nearly every insurance company uses this kind of credit-based insurance scoring – in combination with demographic information, driving history, geography, property value, and claim history – to predict, with startling accuracy, the kind of claims you’re likely to file.

Since the price of your premium is tied directly to these insights, it’s almost always worth setting back plans for a few months to focus on building or raising credit before starting down the road of any significant purchase.