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Do auto insurance companies check my credit rating?

Many factors will help determine the price that you pay for auto insurance. One of the factors is going to be your credit score. Your insurance company has many valid reasons for checking your credit score prior to issuing a policy. Improving your credit score could be a good way to reduce your auto insurance premium. Why does your credit score have such an impact on the premium that you pay?

The Insurance Company Wants the Premium Paid in Full

Auto insurance and your credit score is an indication of your ability to pay your bills. No insurance company is going to want to deal with someone who has a hard time paying bills. Having a poor credit score may require a driver to make a down payment in addition to paying the regular premium. Some insurance companies may not allow drivers with a poor credit score to make payments in installments. Paying for your insurance can be less of a hassle if you have a good credit score.

Paying Your Bills Shows Responsibility

car insurance companies check my credit ratingThe ability to pay your bill indicates a high degree of personal responsibility that is pertinent to obtaining a basic auto insurance policy.

This usually means that a driver is going to exercise that same responsibility on the road. Insurance companies love responsible drivers because it lowers the chance of an accident ever occurring.

Drivers that come with lower risk will also benefit in the form of a lower premium. Therefore, it pays to make sure that your bills are paid on time. Keep that in mind the next time you think about sending in your car bill a few weeks late. Repossessions, bankruptcies and other judgments could severely hinder your ability to get a reasonable price for your policy.

Financial Problems Could Lead to Insurance Fraud

People get desperate when they are having money problems. A low credit score could indicate the presence of financial hardship. This could potentially increase the risk of a fraudulent claim by someone who needs quick cash. Insurance companies are not in the business of helping people out of financial jams.

They need to be sure that a driver is not going to set his car on fire simply to collect a check from the insurance company. The cost of insurance fraud generally results in higher premiums for drivers who have never filed a claim in the past.

Filing a Claim is Tempting

Filing a claim with your insurance company is an easy way to increase the premium that you pay. This is why many drivers are content to pay for minor damages on their own. However, a driver that is lacking for money may file a claim to have the damages paid for. Drivers should seek out insurance companies that offer no-claims discounts. This could be a way for drivers with low credit scores to save money as result of not resorting to filing a claim.

Your Overall Risk is Increased

Your insurance company is pricing your quote based on your risk level. Having a low credit score is another indicator that you may file a claim.

You could be the best driver in the world, but your low credit score is going to cause you to pay more than you would have had to pay for your insurance. What can you do about it? Know what to expect and compare auto insurance rates to get the best options for your scenario.

Unfortunately, the insurance company does not have enough time to get to know you personally. The only thing they are going to see is your credit score when you apply for a policy. It turns out that your credit score can affect your credit rating.

Higher Risk Drivers Cost Everyone More

Drivers who are deemed a high risk cost more to insure. The extra cost is eventually passed down to all other drivers who carry an insurance policy. This is why insurance companies have to be on the lookout for any factors that may indicate an increased risk. Since a low credit score indicates increased risk, you could be forced to pay more for your lower credit score.

car insurance companies credit ratingAlways Shop Around

Shopping around for your car insurance can save you money on your next policy. Once you know how your credit score impacts your auto insurance rates, you can more wisely choose an auto insurance company. There are companies out there that are not going to look at your credit score when pricing your policy. It would be to your advantage to look for these companies if you have a low credit score.

Drivers with a good credit score could still save money just by shopping around. Taking some time to weigh all of your options is a common sense tactic that anyone can use to save money on a car insurance policy.

Having a poor credit score is going to make it difficult to get a low rate on your car insurance. Insurance companies are only going to see that you come with a higher risk of filing a claim. Filing a fraudulent claim might also be tempting if you are having some issues with money. Taking steps to raise your credit score could help convince insurance companies that you are not a risk. Lowering your risk is ultimately going to lower the price you pay for coverage.

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