How Does My Credit Rating Affect Auto Insurance Premiums

A number of consumers may be wondering how credit rating affects auto insurance premium rates. In some states, an insurance provider can look at an applicant’s credit score as one of the criteria it uses to determine the amount of risk that a particular driver presents for coverage purposes.

Policyholders who miss a couple of payments on a credit card may find that they are paying higher rates for coverage. In some instances, the insurance company may even refuse to renew the policy or cancel it outright. At first glance, it may appear that auto insurance rates and credit history don’t have very much in common, but the companies writing policies reserve their best rates for customers whom they feel are the least likely to be involved in accidents.

Auto Insurance Companies and Credit Score

Insurance providers who use credit history as part of the process of evaluating applicants for coverage purposes consider people with high credit scores to be more responsible than individuals who have had credit issues. An argument can be made that people who have run into financial difficulties due to illness or unemployment are not necessarily going to be irresponsible while driving and that during tough economic times there will be more people who find themselves in this situation through no fault of their own.

Improve Credit to Qualify for Better Auto Insurance Rates

Drivers who are facing higher auto insurance rates due to their credit history can take steps to improve their situation. One thing that all drivers can do is to order a copy of their credit report. This information can be obtained once a year, at no charge, from each of the big credit reporting agencies.

Review the information contained in the report carefully and make note of any errors in it. If an error is found, a consumer can write to the credit reporting agencies to request that it be corrected.

Paying current bills on time will help to improve a driver’s credit score over time. Arrange to pay down old debts which are driving the score down.

A driver who does not have a credit history may also be facing higher rates when he or she is looking for auto insurance coverage. It’s a good idea to establish a credit history by applying for a credit card with a low limit and making the payments on time for several months before applying for auto insurance coverage.

Get Quotes from Several Auto Insurance Providers

To find the best prices on auto insurance coverage, consumers should make a point of shopping around. Credit history is only one factor considered when the company sets rates, and not all of them will give it the same level of importance. Most companies consider a person’s driving history as the most important factor when deciding how much to charge for coverage. Making a point of getting quotes from several companies will reveal which one can offer the best price for the coverage that a particular consumer needs.