How Your Credit Score Impacts Auto Insurance Rates in Canada
You have probably heard that it's a smart idea to make your utility payments on time and keep the outstanding balances on your credit cards low so that you can improve your credit score. That's good advice. This is because your credit score can have a big impact on the other parts of your life.
Credit scores in Canada are a numerical value between 300 and 900 that determines your credit worthiness at any given time. According to the Financial Consumer Agency of Canada, a credit score of 725 or higher is considered very good. Among other things a credit score is based on past payment history, the amount of outstanding balances as well as the total amount of credit available.
Having a good credit score can help you be approved for new credit products such as loans, credit cards and lines of credit. But did you know that your credit also impacts auto insurance rates in Canada?
Here are four ways that having a good credit score impacts auto insurance rates:
Your credit score helps determine insurance risks
A high credit score might mean you're financially responsible and car insurance companies like that. When applying for auto insurance, the company will use your credit score to help determine the likelihood of you filing insurance claims in the future.
The higher the score, the more responsible you're considered to be and therefore a more cautious driver. That equals lower risk of an accident and your auto insurance rates will be lower.
It sets the base for payment plans
Insurance companies can request a payment frequency based on your credit score and past payment history. If you have delinquencies on your account, the insurance company can request that you pay in full upon approval. Monthly payment options are usually only available to applicants with good credit scores because the company doesn't want to take a risk of potential default.
You may receive discounts for having good credit
According to ConsumerReports.org it's a good thing to let an insurance company check your credit score because it can lead to discounts.
"Single drivers who had merely good scores paid $68 to $526 more per year, on average, than similar drivers with the best scores. [Insurance companies] check your credit files to predict the odds that you’ll file a claim. If they think that your credit isn’t up to their highest standard, they will charge you more, even if you have never had an accident."
It determines your auto insurance rates in Canada
If you have a high credit score, an excellent driving history, and zero claims on your insurance record, you'll most likely qualify for lower auto insurance rates. It's important to know that parking tickets (unless in excess) don't usually affect your driving record. Insurance companies mostly look at moving violations such as speeding tickets or running red lights.
If you're shopping around for auto insurance rates use a quick online comparison tool to get several quotes in just a few minutes. Remember to be honest about your insurance history and driving record in order to get the most accurate quotes. Don't leave any details out because you don't want surprises later.