Car Insurance and Your Credit Score

Most insurance companies consider your credit score as a factor when determining how much premium to charge you for auto insurance.

Insurance carriers do that because consumer credit behavior has a direct correlation on future claims: consumers with good credit behavior are less likely to have severe losses.

Moreover, your credit score is not the only thing they consider when quoting a new policy. Some of the other factors are your age, type of vehicle, driving record, place of residence, home ownership, and whether you have a family or are single.

When applying for insurance, provide your future carrier with your name, address, date of birth, and social security number. Some insurance providers will look directly at credit reports while others will use what is called the Insurance Credit Score to determine someone’s auto insurance rate. This technique is similar to what lenders use to find the reliability of an applicant when paying a loan.

Your credit history may vary from one company to another because each uses different factors in determining your credit score, so ask upfront what company the insurer uses to reference your credit history. Since each insurance provider uses various methods to determine your credit score, it is hard to tell exactly how this will affect your insurance premium. One thing is sure, however, good credit score will result in lower premiums.

Before applying for auto insurance, check your credit report to make sure there are no discrepancies that may affect your score and, consequently, your insurance premium. As a final step, make sure to shop around and compare auto insurance quotes from various auto insurance providers to get the best deal.