When insurance companies are calculating your insurance premium, one of the most important things they look at is what they call your ‘insurance score.’ Insurance scores are comprised of several things, which what your past driving record has been like, how many accidents you’ve had, whether they were at-fault or not at fault accidents, if you’ve had any lapse in coverage, and lastly, your personal credit score is factored in.
Insurance companies factor in credit reports as part of their overall insurance score because statistics have typically shown that not only do people with a bad credit history have more of a chance of not paying the premium, therefore becoming a high risk for cancellation due to non-payment, but statistics have also shown that those with poor credit score are actually more likely to receive violations, make claims (whether comprehensive or collision claims on their vehicle) but overall to have more accidents and violations in general.
Also, statistics have shown that those with low credit scores also have a tendency to ‘hop’ around to different insurance companies and not stick with one insurer for very long. This can be another benefit to having a high credit score to improve your rate: an insurance company is not going to increase your rate if they believe that you are going to be remaining with them for a long time, and many companies will offer a ‘long-term customer’ discount after you’ve stayed with that company for awhile
Improving your credit score will undoubtedly help lower your insurance premium. Many times insurance companies will not write a policy for those with low insurance scores because they don’t want to risk paying out on a claim and be running the risk of not receiving that money back if the policy holder does not pay their premium.
In extreme cases, some insurance companies are starting to place very strict restrictions on what type of policies can be written according to varying credit scores. Some of the larger names in insurance that are operating will especially deny writing any sort of property policy for those with poor credit or those who have filed bankruptcy. Some even refuse to write auto policies based on credit.
So not only does having a better credit score help lower the price of your insurance, it also increases your options of insurance companies, thus providing you more opportunities to find a better rate. You can get your credit score withouth paying money from Credit Score Wiz – it takes just a minute and you will be able to see your credit rating instantly. Additionally, if you are able to obtain auto insurance with a company and not a property policy, you’ll miss out on discounts like a multi-policy discount for having more than one policy with the same company.
Insurance companies consider low credit scores into their insurance scores because they’ve had the evidence to consider what a low credit score can result in. History is generally a good indicator of what the future. Working on your credit score may take some time, but once you do achieve a higher credit score, you’ll see insurance rates begin to drop as a result. For more information make sure to check our resource page.