This 1 Mistake Could Boost Your Car Insurance Premium $2,200 -- and It Has Nothing to Do With Your Driving

Several factors go into an auto insurance premium: the driver's accident history, their vehicle make and model, their ZIP code, and even personal factors like marital status and education level. Some of what insurers associate with increased risk of accidents might surprise you, especially since a few of them aren't directly related to driving at all.

One factor in particular could raise the average car insurance premium by $2,200 per year. We'll talk about what it is below, whether it affects you, and what to do about it if it does.

There's a correlation between risky financial behavior and car accidents

If you've ever gotten an auto insurance quote and wondered why you needed to provide your Social Security number, it's so the insurer can run a credit check. Auto insurance providers in many states look at credit scores when determining premiums to offer their drivers.

How much this affects a driver's rate depends on their state and insurer. But in the U.S. as a whole, drivers with excellent credit typically pay about $1,947 per year while those with poor credit pay about $4,145 per year for the same coverage. That's a difference of $2,198 per year.

It might seem odd, but insurers argue that there's a relationship between credit score and the likelihood of getting in a car accident. Many lenders and insurers view a low credit score as an indication that someone is making poor financial choices and living beyond their means. There's a greater risk of these individuals defaulting on loans, and some say this is indicative of a personality that may also take unnecessary risks behind the wheel. As a result, they charge drivers with poor credit more for their coverage.

This is a generalization, and there will always be some drivers who don't fit the pattern. This could be why the following states have banned or restricted auto insurers from considering credit scores when setting premiums:

• California
• Hawaii
• Maryland
• Massachusetts
• Michigan
• Nevada
• Oregon
• Utah

Some of these states ban the usage of credit scores entirely in auto insurance premiums, while others just forbid insurers from denying coverage or failing to renew a policy based on credit scores. Drivers who live in one of these states should contact their state department of insurance to learn how companies can use credit score data. Those who don't live in one of the above states can be pretty confident that their insurance provider will consider their credit score when calculating their premiums.

How to improve your credit score

Drivers with poor credit can reduce their premiums over time by raising their credit score, but this won't happen overnight. Credit scores are designed to provide a long-term view of how a person has handled borrowed money, so it takes months, if not years, to make the jump from poor to excellent credit. But don't let that discourage you. Take things one day at a time.

The most important thing to do to help your credit score is to pay your bills on time. Set reminders if you have to so you don't forget. You could also consider setting up automatic transfers from your bank account. If you cannot afford to keep up with your payments, try to reduce your spending and contact your creditor to see if there's anything you can do to avoid falling too far behind on your payments.

A secured credit card can also help you build a credit score over time. These cards are excellent options for those with no or poor credit histories. They require a security deposit, which you can get back when you close the card if you've kept up with your payments. Your credit limit is equal to that security deposit. These accounts don't often have rewards and may have fees, but regular, on-time payments boost your credit score over time.

Once your credit score has come up a bit, you may wish to shop around for new auto insurance. You might be able to find more affordable rates than you had in the past. Or if you really like your current insurer, let the company know your credit has improved. It may offer you a better deal to avoid losing you to a competitor.

If you still aren't able to find a rate that fits comfortably in your budget, keep working at it. As you build your credit over time, you should open the door to lower premiums.