Cash is King – Upside Down Mortgage Solutions

September 2, 2009

Your Credit Score: Does It Affect Your Car Insurance Premium?

The answer to that question has quickly become a resounding ‘Yes.’ Today, most auto insurance companies use your credit score as a factor in determining your premium rates. But it shouldn’t come as that much of a surprise to you. After all, credit is a factor for everything from renting an apartment to purchasing a new cell phone. In a sense, auto insurance companies are extending a line of credit, of sorts, to those they insure. It is in their best interest to make sure they insure those who will file the least amount of claims, or that they charge significantly more for those who will.

Why Credit Matters

While there are a few insurance companies that don’t look at credit scores in determining premium rates, most do. In fact, it is estimated that around 92 percent of insurance companies do look at your credit. They do this because, just as in other situations, your credit is seen as a sign of just how risky of a driver you may be. If you have a low score insurers may feel that you are someone who takes more risks, doesn’t keep up on their financial responsibilities and will be more likely to file claims, thus costing them more money.

Having poor credit may impact your insurance rates but, as you know, a credit score doesn’t tell someone’s whole story. Because of this, it’s not the only piece of information they use. They also look at your driving record, age, where you live, vehicle being insured, and other factors. You may be able to help offset poor credit somewhat by having a great driving record and by avoiding having a vehicle that is considered risky, such as a sports car.

What You Can Do

The good news is that, if you have good credit, you are likely to save money on your insurance premiums. So this is yet another reason to try to improve your credit. But just how do you go about doing this? Start by getting a copy of your credit report and reviewing it. Locate anything that is not correct and file a claim with the agency to inform them that it is inaccurate.

Beyond that, work at fixing any credit problems you have and improve it overall. You can do this by paying bills on time, lowering your debt to income ratio, and not opening up new credit accounts. Then, be sure to get new auto insurance rates periodically. If you get your insurance policy with a credit score of 525 and you raise it after a year to 620, you will want to either inform your current carrier or get quotes from others to go elsewhere. Improving your rating should translate to a lower premium, either with your current insurer or by obtaining a new one.

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16 Comments »

  1. Are you fucking kidding me? and you suggest we as consumers sit and take this crap? Ones Credit score should NOT be a factor in determining a rate, How are they extending you any type of credit? if you pay your insurance in instalments then add a percentage to those not to the policy itself, it is just bullshit that we are allowing this to happen. In the meanwhile you sit idly by and suggest “what do you expect” … ? Because One has a substandard or porrer credit rating does that make them uninsureable? that is absoloutley ludicrous. We need to put a stop to this madness. This has gotten way out of control when employers base hiring on credit scores, insurance companies base rates on credit scores, next hospitals will base your treatability on your credit score!

    Comment by Fuck This Shit — May 19, 2011 @ 10:34 pm | Reply

  2. they can use credit to deny you a job, apartment, job, list goes on. they get to do what ever they fucking want because this only effects the 99%’ers not the 1%’er who make the rules.

    Comment by john doe 80004 — January 6, 2012 @ 4:00 pm | Reply

    • they can use credit to deny you insurance, apartment, job, list goes on. they get to do what ever they fucking want because this only effects the 99%’ers not the 1%’er who make the rules.

      Comment by john doe 80004 — January 6, 2012 @ 4:01 pm | Reply

  3. oh need i remind you the great marxist in office has not practiced what he’s been preaching. he could push to put an end to these practices and use credit rating for what it was intended. extending you cash credit on an necessary item, but has refused to do so. credit rating should not be allowed to be used to deny for the necessities of living only for luxuries.

    Comment by john doe 80004 — January 6, 2012 @ 4:04 pm | Reply

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