Obtaining Affordable Auto Insurance If You Have a High Credit Score

You may realize that you have a credit score, and you may even know the exact number. However, what you may not know is that this number can affect the rate you are charged by your property or auto insurance company. Insurance companies use a very similar ranking system to evaluate the risk factor for every prospective customer. Therefore, improving your credit score can actually help you obtain affordable auto insurance.

The system used by insurance companies is called an insurance score. The evaluation process factors in how quickly you pay your bills, as well as the number and frequency of claims you have had on previous insurance policies, and how much they have cost any prior insurers.

You may be surprised at how much of an influence your insurance score has on the cost of your property and auto insurance premiums. Robert Hartwig is the president of a nonprofit consumer agency called the Insurance Information Institute. He sheds more light on how insurance companies use credit scores to determine premiums: “These scores are basically credit information that an insurance company uses from your credit profile, but they then take that and relate it to actual information regarding your claims history or your legal history.”

Insurance companies view individuals with a poor credit history to have a higher risk of incurring a loss by submitting more claims or higher claims. That’s why this group of people tends to pay much higher premiums for their auto insurance. One way to prevent this is to ensure your credit score remains high and avoid submitting more than one insurance claim unless absolutely necessary.

Insurance companies don’t require all of the data that is contained in your credit score; they merely review information that correlates between a person’s potential risk factor and credit history. For example, individuals who are responsible with their money tend to be more responsible in other areas of their life as well, including driving.

Because the ranking factors used to determine your credit score take many years to formulate, you can’t change your insurance score overnight. Insurance companies also won’t disclose the particular insurance score they used to determine your premiums, because insurance underwriters use different methods. By not divulging their ranking methods, insurance companies are able to better compete with their competitors in the industry.

Regardless of these facts, you should always take your time and obtain insurance quotes from more than one insurance company. You may be able to find a much lower rate for the exact same coverage by talking to a different insurance provider. This step, combined with improving your overall credit score, will help you obtain the most affordable auto insurance.