Credit Scores and Auto Insurance Quotes

If you are confused about why your credit score matters when it comes to auto insurance quotes, you are not alone. As it became apparent that insurers were accessing drivers' credit histories as part of their pricing strategy, questions arose and persist about the relationship between credit and insurance rates. It is important to address these concerns before you attempt to buy a new policy or switch insurance companies.

Understanding Your Credit Report

You should have an idea about what is in your credit report so you know what prospective insurers see when they request a copy from the three credit bureaus. A typical report includes:

» Indentifying details - your name, all current and past addresses, date of birth, and Social Security number
» Credit history - the number of credit cards and loans you have and your history of meeting your financial obligations by paying months bills on time
» Public Records - foreclosures, judgments, collections, bankruptcies, garnishments, and tax liens instituted by the courts
» Inquiries - list of companies, financial institutions, and other entities that have requested and received a copy of your credit history

It is important to note that insurers do not need your permission to access your credit information. And, it does not hurt your credit rating when insurers make inquiries into your credit history because it is considered a soft inquiry.

Why Insurers Use Credit

According to an insurance research firm in Connecticut, at least 90% of insurers acknowledge using credit information when determining auto insurance quotes and underwriting policies. Insurers believe your credit score is the simplest way to gain insight into your financial history. Industry studies have shown a driver's likelihood of submitting a claim directly correlates with his history of maintaining reasonable limits of credit and paying his bills on time. In short, your credit score is a good indicator of your risk level for potential loss to your insurer. Insurers specifically consider:

» Length of credit history
» Available credit
» Outstanding debts
» Delinquent payments
» Applications for credit

You can get lower premiums by keeping your finances you order, paying your bills on time, and managing your use of credit.

Other Variables Used to Calculate Rates

Your credit history is one of many factors an insurer uses to determine how much you pay for coverage. The most important variables include:

» Driving record, including participation in defensive driving courses
» Make, model, and year of vehicle
» Age, gender, and marital status
» Where you live and work

As a result, a driver with a high credit score and a recent DUI on his record will not be able to get the lowest rates available because of his bad driving record.

Taking Advantage of Choices

If you are worried because you do not have perfect credit, use free auto insurance quotes to see what options are open to you. You may be surprised to find great deals when you get online auto insurance quotes from major insurers in your community. Because insurers use different methods to calculate rates, you should be able to find one that places less emphasis on credit scores.


Auto Insurance Quotes for Different Coverage Options

Before requesting auto insurance quotes, you should determine the type of coverage you need and how much coverage you can afford. Learn about coverage options and policy add-ons that can provide extra protection.

High-Risk Drivers

Auto Insurance Quotes for High-Risk Drivers

Certain drivers are required to pay more for coverage. Find out how you can still get competitive auto insurance quotes if you have been classified as a high-risk driver.

Credit Scores

Credit Scores and Auto Insurance Quotes

Insurers consider many factors when setting rates for coverage options. An important one that is often overlooked by drivers when getting auto insurance quotes is their credit score.