Many people are confused when they receive vastly different auto insurance quotes from different companies.

Why should there be such a large discrepancy? How do auto insurance providers determine a rate quote?

There are several factors that can be used, and they vary from provider to provider.

Credit rating

Your credit rating does not just impact how easily you can obtain a car loan. It is also used to determine your auto insurance rate.

According to Insurance.com, many insurance providers will run a credit check based on specific parameters, such as how often you've been late paying bills.

Auto insurance companies use your credit rating because it tells them how likely you are to pay your premiums on time. A lot of late payments indicate an unstable financial situation, which means they are going to charge you more because you constitute more of a risk.

Steve Pape, an insurance agent for Midwest Insurance Group outside of Milwaukee, explained that some companies use credit scores for determining discount rates, while others use it to determine which rating tier a driver falls into.

"In determining rates, your score is used in conjunction with your claims history, driving record and other factors," he said.

Driving habits

There are several ways that your auto insurance rate can depend on your driving habits.

State Farm lists where you drive, how often you drive, how far you drive and your driving record as factors when issuing a quote.

For example, if you drive 30 miles to work every day, your auto insurance rate will likely be higher than someone who works right around the corner from his house. That's because the longer you are in your car, the higher the likelihood that you will be in an accident.

Similarly, if you live in a high-crime area where car theft is more common, you will be considered more of a risk.

Your vehicle

The next factor that is often used to determine your auto insurance rate is the type of vehicle you drive.

More expensive cars yield higher premiums in most cases, while a cheaper car will be less expensive to replace should it be stolen or totaled. It is important to consider potential insurance costs when buying a new car.

You might also qualify for discounts on your auto insurance rate if your car is equipped with certain safety features such as air bags and rear-mounted cameras. You can discuss those discounts with your insurance provider to see how much of a discount they can offer.

Type of coverage

According to FreeAdvice.com, there are five basic types of auto insurance coverage: bodily injury liability, property damage liability, uninsured (or underinsured) motorist, collision and comprehensive.