If you suffer from bad credit car insurance rates could also suffer as a result
If you think your excellent driving record guarantees you the best auto insurance rate, you might want to think again. Unfortunately, if you have bad credit, car insurance rates may not be as low as you would expect them to be. When calculating auto insurance rates, bad credit is one of the determining factors that may count against you, even if it has nothing to do with your driving skills.
How your credit rating factors in
For nearly a decade, car insurance companies have been using credit information to calculate your insurance risk score, a key factor in determining the rate you pay for your insurance. According to the Property Casualty Insurers Association of America, historical data and related research indicate that drivers with poor credit are more likely to file insurance claims. As a result the risk score for this group of drivers is increased.
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When determining car insurance rates, this research suggests that bad credit is a solid predictor of risk, maybe even more so than a driving record. At least, that's what many insurance companies think. Motor vehicle records can be altered by having tickets removed, charges reduced and other things along those lines. Credit, however, tends to be steady over time and is much more difficult to change.
What insurers look for
When evaluating your bad credit, car insurance rates can be affected based on a number of different areas of your credit report. Insurance companies tend to look at areas such as:
- Your past payment history
- The amount of credit you owe
- The length of time that credit has been established
- How much new/recent credit you have
- What types of credit are on your report
Insurance companies who place added weight on your credit score argue that your credit history helps to establish your level of responsibility. The more responsible you are with your finances, the more likely you are to be a responsible driver.
Not all insurers treat credit equally
When it comes to bad credit, car insurance rates may be calculated differently depending on which insurance company you are dealing with. Some companies only consider major events, such as bankruptcies or foreclosures, while others consider your overall report. When dealing with an insurance company, you should always ask what factors in your credit report were considered when calculating your rates. Most insurance companies won't tell you how information is weighed, but they'll likely list the factors that affect your rates the most.
(This guide will show you other factors that impact your car insurance prices)
If you think you're getting high rates for car insurance quoted to you and that it has to do with bad credit, car insurance rates differ from one company to another. Shop around. Don't be afraid to take your rate quotes and show several different car insurance agents. If you want some additional help, let us. Reply! can put you in contact with local car insurance agents who would be more than happy to compete for your business, whather you have credit challenges or not.