How Your Credit Effects The Cost of Your
Auto Insurance Policy
Did you know
that even if you have a spotless driving
record that you can still wind up paying
more for auto insurance coverage than
someone with a poor driving history? How? Most auto
insurance carriers are going to label you
high-risk if you have a poor credit history.
Having bad credit may not only effect the
cost of your policy, it may influence the
decision of whether or not a policy should
even be issued for your vehicle.
Ironically, an individual with a blemished
driving history but a good credit history
can pay a smaller amount for auto insurance
than someone with a great driving record,
but a poor credit history.
How much more
can I expect to pay for my insurance policy
if I have bad credit?
Typically, a policy for someone with poor
credit is going to cost 15-45% more than the
cost of a policy for a person with good
What if I
have good credit?
If you credit score is very strong, you
can land low rates. A good idea would be to
shop around and see what the best rate you
can get would be.
How do auto
insurance carriers determine my insurance
company has there own method of coming up
with their own formula, based on one or
several different numbers,
for calculating your auto insurance score.
companies will either formulate an insurance
score based on credit information obtained
from one of the three major credit reporting
companies, or from information directly
received from your FICO score.
What is the
difference between my auto insurance score
and my actual credit report score?
Carriers do not look at the information on
your credit report.
They are not concerned with how long you
have had credit, how many accounts you have,
how much unsecured debt you have, how many
times you have been delinquent, etc..
There are merely interested in what your
credit score is.
Is there anything I should do before I
purchase auto insurance?
Similar as to when you apply for a car
loan, you should obtain a
copy of your credit report. You want to
make sure all of the information is accurate
and up to date.
Is there a
way that I can obtain a copy of my auto
Unfortunately, no. As mentioned, every
insurance company is going to have a
different means of how they formulate your
auto insurance score and can not be ordered
like credit report.
I am looking
to get a new policy. How will my credit
effect the new policy?
Auto insurance companies will not
recalculate your auto insurance score once
you become a policy holder. So, if your
credit has declined since you purchased the
policy, you may be
better off keeping your current policy.
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