Is car insurance rate affected by credit rating?
You may be surprised that your payment habits will also affect your car insurance premiums. And yes, failing to pay for your bills for a month or two will have a considerable impact on your premiums.
This is what is called credit scoring in the insurance industry. Missing payments on two or more financial obligations (including loans and credit card bills) may mean an increase in premiums up to as much as 50%!
When you apply for your car insurance policy, the insurance company will evaluate your credit standing and use this as one of the criteria for setting your premium rates.
Good Credit Ratings = Good Driving Habits?
The principle behind the use of credit rating as a basis for premium rates lies on the belief that someone who is careful in managing his money and financial responsibilities will also be careful on the road. And really, this has been proven true, according to experience in the insurance industry.
It is shown that those with good credit rating follow traffic rules more carefully and also implement safety measures. They also tend to install anti-theft and safety devices. In addition, they tend to use their seatbelts and make sure that their passengers are properly secured as well.
Bad Credit Ratings = Higher Risk?
Not only are those with bad credit ratings considered higher risks on the road. The insurance industry also sees these to have the propensity of filing nuisance or unnecessary claims or inflating claims (quoting for a higher claims amount compared to the actual loss).
Take Care of Your Credit Rating
Thus, you need to be careful about your credit rating, because it will affect not just car insurance rates, but also the rates for other products such as homeowners or renters insurance.
The insurance company will look into: instances of bankruptcy, foreclosures, and liens, as well as past payment history.
| Not a bit | Very useful |
- What criteria place a car in the sports car insurance bracket?
- What is car insurance discount for defensive driver training?
- Can you get auto insurance with just a learner's permit?
- Will a speeding ticket from another state affect your auto insurance?
- How do you find insurance records from a previous owner of a car?
- Are you covered by a family member's insurance when driving their car?
- If you are charged with a DUI how does it affect your auto insurance?
- Does an auto insurance policy have to be in the same name as the car loan?
- How is PLPD insurance different from no-fault or full coverage auto insurance?
- What is the difference between assigned risk and non-standard auto programs?
- What is PLPD (Public Liability and Property Damage) auto insurance?
- Where do you find commercial automotive liability coverage?
- What does an insured driver do when hit by an uninsured driver?
- What is the difference between standard and non-standard insurance?
- At what value of your automobile should you change from full coverage to liability?
- What is the difference between full coverage and public liability insurance and property damage insurance?
- How much money do you get if your car is totalled?
- Does company insurance or workman's comp cover car accidents while working?
- How do you handle the insurance after a 'hit and run' accident when you took down the license plate number?
- Will your premiums go up if you were involved in an auto accident but were not at fault?