Why your credit matters when it comes to auto insurance
There are so many factors that go into car insurance rates. You might feel frustrated when your provider starts asking you about everything. You might even be surprised by some of the factors that are considered before you get your auto insurance quote. The one often-surprising aspect of your car insurance rate is your credit.
It seems a little wrong that your credit score is related to your auto insurance rates, but the fact of the matter is that it can be used in setting premiums. Here’s what you should know about auto insurance and your credit:
The insurance provider needs to take everything into consideration
When someone insures you, they’re taking on a decent amount of risk. They want to perform their due diligence. They try to cover all of their bases. Imagine you were in their position. You would want to know everything possible about the person that you’re protecting financially. The insurance company is not only responsible for you, but for anything that happens to you on the road. They don’t want to be stuck with thousands of dollars of bills when you get into an accident.
One of the reasons credit is considered is due to the fact that it indicates a certain level of responsibility. There are indications that people with good credit are also more likely to be careful in other areas of their lives – including driving.
Your credit is a measure of your financial history
Your credit history shows how long you’ve had credit for, how well you handle credit, if you make payments on time, and your overall financial history. On the simplest level, the insurance provider wants to know that you’re reliable when it comes to making payments on time. On another level, they want to know how reliable you are when it comes to your commitments.
They’ve conducted research on the topic of credit and driving
Insurance companies are notorious for researching every little detail. I found this interesting line from an article over at Esurance:
“Statistical analysis shows that those with higher credit scores tend to get into fewer accidents and cost insurance companies less than their lower-scoring counterparts.”
You can disagree with this statement, but this is clearly why your insurance provider wants to check your credit. They’ve done their research and are going to use this factor before they provide you with a quote. Their goal is to save money in the long run. They don’t want to insure you if they don’t trust you.
Your credit is just one aspect of your insurance rate. Remember that the company will also look at your car, your driving history, and your community. Be prepared to answer questions about your credit. If your credit score isn’t where you want it to be, this is a friendly reminder to start working on it.