Understanding How Your Credit History May Affect Your Car Insurance Coverage

Today, more and more auto insurance companies are reviewing an applicant’s credit history when determining their insurance premium. In fact, if you are in the process of comparing insurance rates, the chances are the companies who are quoting you are using your credit history as one of the factors in the rate you’ll be offered.

The key factors that are weighed in determining a premium still include things like your age, how long you’ve been driving, your accident history and other demographic factors, but auto insurance companies maintain a correlation between the status of a driver’s credit and the potential for incurring claims. A better credit history indicates a lower chance of excessive payouts.

Short of maintaining or, if your credit history is not the best, improving a high credit rating, there isn’t a great deal that you can do to change the way a credit history analysis will affect the insurance you are offered. You can seek out companies that don’t use credit history analysis or weight it less heavily than others, but federal trade regulations allow an insurer to review you credit history as part of the application process.

Weighing the Impact of Credit on Premiums
Even for insurance companies that review it, your credit history is only a single point in a multitude of factors that affect your rate. How old you are, your driving record, your town, and the type of car you drive will all be factored in as well. It is not really possible to say just what role a less than stellar credit history will play, so in that sense, it might not be worth undue concern over how that affects the premiums you are offered.

More Information on Credit Scores
You may wonder how an insurance company rates your credit history. Each insurers’ credit score is reached using a variety of possible information resources.

Most insurers reference a Credit Score obtained from one or more of three leading Credit Reporting Agencies, Equifax, Experian, and Trans Union. They may also review one or more of your full credit reports from these agencies or use other information resources, such as public records.

Because they use differing factors in reviewing your credit history, you credit score may vary between insurers. Different insurance quotes may be affected by these varying scores, but keep in mind that the credit history scoring is just one factor among many in determining the rate you are offered. A better credit score generally leads to a lower premium or qualification for certain discounts.

Check Your Credit
It’s a good idea to know what your credit history contains before you begin looking at auto insurance quotes. If you don’t know, you may be able to get a copy of your credit report from each of the leading Credit Reporting Agencies at no charge. You can contact them here:

• Equifax 800-685-1111 http://credit.equifax.com
• Experian 888-397-3742 http://experian.com
• Trans Union 800-888-4213 http://transunion.com

If you find what you believe to be incorrect information on you credit report, you can request an investigation to clear up the discrepancy. And should it prove that there was a mistake, you can request that they notify any insurance company that looked at your information in the preceding six months. Also contact any insurer to which you have applied to make sure they have taken the new information into account and can adjust your current insurance rate or the insurance quotes they provided.

Disclaimer: The contents of this and all articles provided by Insuredirect.com are for informational use only, as the specifics of any situation will vary with the circumstances. Do not consider the information provided in this article as a recommendation on purchasing any specific auto insurance, homeowners insurance or other type of insurance product, or to provide financial or legal advice. Without exception, all information is presented for information purposes only.

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Rev. V.1 - 11-14-2007