How Does Credit History Affect Car Insurance Rates?

Many car insurance companies consider your personal credit information when determining premium amounts to be charged for your insurance. So if you are looking around for new car insurance, keep in mind that many insurers are looking at your credit history to determine your auto insurance rates.

The reason some insurance companies use credit information is because they feel that there is a direct correlation between the behaviors of a consumer's credit history and expected that claims may occur.

Many insurance companies still use your age, driving history, type of vehicle, and where you live determine how much you should pay for your insurance. Therefore, if you have not established a credit history yet, companies that use credit history may not be best for you.

Companies that do honor to use credit scoring will still use other factors that determine your premium. They will also use your age, driving history, vehicle type, and where you live to determine how much you should pay for your insurance.

If you believe that your credit history is better than the insurer can find, make sure the insurer has your name, address, ID number and date of birth.

Some insurance companies look directly at your actual credit reports to determine your rate, but most use what is called an "insurance credit score." An insurance credit score is developed using techniques and statistical methods to predict the likelihood that a consumer will have higher than expected losses. They are similar to what lenders use to predict the reliability of an applicant to repay a loan.