How Your Credit Report Affects Your Car Insurance Rate
Your credit doesn’t affect your driving skills, and there are plenty of drivers with the worst credit ever who are also the best drivers around. However, if you want to get cheap car insurance, then having a lot of negative accounts on your credit report might prove an obstacle. Although the car insurance company does not look at your report the same way as, say, a car dealership does, bad is bad and if one thinks your credit report isn’t so great, the other will as well.
Using credit reports to affect your car insurance rates is no longer an occasional thing. Almost all (upward of 90%) car insurance companies check credit before they give out a policy, and the same goes for companies who do home owner’s insurance coverage. When they check your credit report, they will gather the information into what they call an insurance risk score. Over fifty percent of the companies in the above ninety percent in turn take that insurance risk score and use it to decide if you will have a insurance premium or an expensive one.
According to Fair, Isaacs, and Co., a company which comes up with insurance risk scores which are in use by over three hundred car insurance companies all over the country, while both credit scores and insurance scores use the same information to come to their result, they are not exactly the same.
As a matter of fact, car insurance companies look at the report in a different way when they weigh the score. In the end, the scores of credit and insurance can end up having a difference of as much as ten percent.
When you get a credit score, normally they are looking at how stable your accounts are, whether you are constantly opening and closing new ones and so on. It’s also important to your FICO credit score how much you owe on certain things. With insurance scores, they just want to know that you pay, and pay regularly.
Loading ...