How Credit affects your car Insurance rate

Sunday, June 06 2021

In this day and age your credit score is used for determining a lot of different things, such as interest rates on car loans, credit cards and much more. However, recently auto insurance companies have started running credit checks to help determine what your coverage premium will be. Below are some reasons why insurers have started to run the policy holders credit and how having a high credit score when renewing your policy can be a great benefit to you.

One of the main reasons insurance companies are now looking at your credit score to determine your insurance premium cost, is because higher credits score, in their eyes, merits responsibility. If you are responsible with your finances, the more likely you are to be a responsible driver; thus, making you less likely to make an expensive insurance claim.

If you are someone with good credit you can greatly benefit from having your insurance company check your credit score. For example, if you have great credit, but have a few things on your driving record, having your auto insurance company run your credit can help to lower your premium costs that may have been at a higher rate because of your driving record. However, if you have a poor credit score you may want to wait until your credit score is higher before you shop for a new policy or a new insurer. Even if you have a clean driving record your premium may go up due to your low credit score. It is common for policy holders with low credit to pay twenty to fifty percent more than a policy holder with high credit. You may benefit from checking your credit score before you shop for a new auto insurance policy. As a result you will know what score your insurer will see when they check your credit, and help give you a better idea of what your premium will be.

Most auto insurance companies will only look at your credit score and not the details of your credit history. If your auto insurance provider does look into your credit history, they will most likely look for any large negative credits such as foreclosure, bankruptcy or any accounts that have gone to collections. Your insurer may also look at whether or not you own your home, how long you have been in the credit system, how many credit lines you have open and how many outstanding debts you have.

Insurance companies will differ when it comes to what they consider to be a great score. A score that gives you the lowest premium rate at one insurance company may not give you the lowest premium rate at another. You will benefit from getting quotes from a few different insurance companies to ensure you are getting the best rate possible.

If you are shopping or planning to shop for auto insurance in the near future, you may benefit from knowing your credit score before you start getting quotes to make sure you are getting a fair rate. Also, not all insurance companies check credit scores of potential policy holders. If you have any questions about how your credit score will affect the cost of your premium, be sure to ask your insurance provider.