Did you know that car insurance providers can use your credit score as an underwriting factor when determining your car insurance rate? In fact, over 50% of all policy holders have lower premiums because of their credit score. Also, car insurance companies can now better accurately price their insurance. While many people view the use of credit scores as a negative factor, half of the people are saving money on their car insurance because of their credit score.
How Car Insurance Companies Use our Credit Scores
Car insurance companies are using our credit scores to assess the risk of insuring us. More and more car insurance companies are correlating our credit scores with how well we drive. Basically, the higher your credit score, the better driver you are.
Banks and other financial institutions had long used credit information in determining risk on business such as home loans, and the correlation between those financial records and insurance risks became clear.
The average cost of a claim for a person with below average credit is $918, 53% higher then the average claim. Likewise, the cost of an average claim from a person with above average credit score is $558, 23% below the average claim. Statistics sourced from the Insurance Information Institute (III.org).
A Good Credit Score can Save You Money on your Car Insurance
Many states require car insurance companies to tell consumers what top factors have been used in determining rates, but your insurer may not even understand the exact significance of some of the numbers, since they often come from outside sources. If you're interested in finding out if credit was used to determine your rates, contact your insurance carrier.
The better your credit, the better your car insurance rates will be. If you do have below average credit and feel you are paying too much, shopping around for car insurance could save you money. Using InsWeb's online quote form, you can compare multiple car insurance quotes quickly and easily.
