A number of U.S. credit monitoring websites have revealed that your personal credit score might be related to the auto insurance premiums demanded by car insurance companies in the state of New Jersey. According to the survey,  New Jersey residents with higher credit scores could save huge sums of money for direct car insurance compared to those with low scores.  Currently, a number of prominent car insurance companies in New York,  New Jersey and Pennsylvania use this method for auto insurance premium calculation. The process has been cited as unfair by many New Jersey drivers although it is legal in many states.

Many Drivers have been for a long time familiar with the basic criteria used by New Jersey Direct auto insurance companies to calculate premiums. Auto insurers consider your personal driving history, car insurance claims record, age, sex, type of vehicle and the area of state you reside. Drivers argue that this information is enough to obtain cheap car insurance quotes from any insurer. New York and New Jersey insurance companies tend to disagree on this point.

According to some auto insurance carriers, the relevance of credit scores in premium calculations does not apply to all customers. This condition is only applicable for clients who choose to make payments using monthly installments. Those who make full premium payment upfront are not affected by the credit score stipulation. The whole debate surrounding credit scores is because a majority of Car insurance clients belong to the former category.

Generally, a credit score is a numerical assessment of your personal credit worthiness. Bottom line, the question is “do you pay your bills or not?”  It is based on your credit report as tabulated by any of the credit reported agencies tasked with the responsibility. You are normally requested to authorize the bank to order a credit report or score when you apply for mortgage, credit card or other forms of loans from lending institutions. It is only recently that auto insurance companies have begun to request credit scores from prospective clients. Conversely, seven states including Maryland, Michigan and Texas have passed legislation that restricts this requirement in one form or the other. Car Insurance Carriers which do use credit as a factor in determining auto insurance rates beleive the following.  Solid statistics show those drivers with a good or better credit rating have less accidents, tickets, violations. Drivers with good credit are more responsible and will also pay their bills on time.

Nonetheless, you do not have to concern yourself  with the thought of paying higher premiums due to a poor credit scores. InsureDirect.com represents many carriers where a credit score is not much of a factor.  We have other carriers where it’s no factor at all.   There are a number of ways of reducing your auto insurance premium without relying on your credit score.

This is part one of a two part article.  Please watch Monday’s Blog for part two….

-Mike