How does Credit History affect my Auto Insurance Quote?
How does your credit history affect your insurance quote? Why do companies use your credit score to figure auto insurance rates? And what information comes up on your credit report? These are all good questions, and it is your right to know how your spending history affects your auto-insurance quote. The following information provides some answers to these questions as well as a few others.
What information is used in a credit score?
The credit report is based on your personal information: name, social security number, telephone number, birthdate, and address (previous and current). A report compiled by a credit expert includes your past history of fulfilling credit obligations to retail outlets, banks, credit unions, other financial institutions, and on mortgages and loans. Any information contained in public records… foreclosures, bankruptcies, collection agencies, legal judgments, tax liens, and wage garnishments will also appear in your credit report. Additionally, most credit inquiries submitted during the last two years will appear on your credit report.
Do all auto insurance companies use credit scores?
Many insurance carriers use credit scores to determine quotes. In fact, over 90% of companies providing automobile insurance use this information to underwrite new client policies. Credit scores are just one of several factors that underwriters use when determining rates. Other variables include: vehicle type, driving-record, your address (location), gender, age, as well as other factors.
Why do insurance companies use credit ratings?
Insurance-companies look at your financial history; along with the number of years you have spent behind the wheel, in order to assess your overall driving record. Research shows that there is a direct correlation linking clients’ financial histories to loss-potential. Insurance companies use credit scores as one of the determining factors when estimating potential risk.
Do credit scores discriminate against people and groups of people?
Credit scores are created based on a person’s credit history and not on age, race, religion, gender, employment, or address. Therefore credit scores are not designed to discriminate according to individual bias.
Will the auto insurance scores be the same as credit scores?
They are not the same. The insurance score is based on the estimated chance that the insured will be involved in a future claim. The credit score, on the other hand, is based on predictions related to the probability that the consumer will make future credit payments on time.
What data is used in calculating the insurance score?
The credit factors that may be used are: past debt history, extent of credit history, recent credit applications, over-due payments, credit-type, patterns for payment, credit that is available, past due amounts, and public records. Your credit score can contain both negative and positive information. Different methods are used to calculate credit scores using distinct variables that factor into the final credit rating.
How do I correct erroneous information?
Most reports provide accurate information although, occasionally, there are mistakes. Should you find an error in your credit report, contact the agency that created the report to correct the inaccurate information.
As you can see, your credit history can affect your insurance quote. The best way to lower your auto insurance rate is to maintain a good driving record, pay your bills on time, and try not to accumulate high balances on existing credit cards.