In many states, people with poor credit history pay larger premiums than people with drunk driving convictions.
With a good credit score, you can apply for a mortgage or loan among other things. However, most people are not aware that their credit scores also affect their auto insurance rates. Well, here is what you need to know about the correlation between your credit score and your auto insurance rates.You may also qualify for a no credit check insurance from those who provide but it will be expensive according to Sure Buy Car Insurance.
What Is A Credit Score
It's a number that falls between 500 and 900, used to determine your financial stability. Companies and other institutions may refer to your credit score to determine your likelihood of repaying debts. Your credit history is how the number increases or goes down depending on your financial fitness through the years.
How Does It Affect Car Insurance?
For about 2 decades, car insurance companies have relied on credit scores to calculate your premiums. Well, most car owners were not aware of this fact but here is what you need to know about the correlation between the two.
Well, it all comes down to statistics where there is a correlation between your current credit score and your likelihood of filing a claim. Therefore, these insurers will rely on this correspondence and increase the premiums for the drivers with bad credit scores.
How Can A Poor Credit Score Affect Your Car Insurance Rates?
It's popularly known that your auto insurance premiums will be determined by your driving record among other variables such as marital status, gender, age, address or the previous claim history on your vehicle.
Therefore, people who pay a huge premium amount are those with poor driving records, people living in crowded cities with high crime rates, single teenage male drivers and also people who own sports cars or luxury vehicles.
However, the auto insurance industry also uses credit ratings to determine the premiums. People with lower FICO scores are paying a lot more for their premiums than those with the top ratings. Recent reports reveal that 95% of auto insurers consider credit scores to price their insurance policies.
Another survey indicated that a lot of drivers, (a margin of 2:1), didn't approve the use of their credit scores by their auto insurers to determine their premium rating. Your FICO ratings are mostly left when determining your creditworthiness for repaying loans. If your score falls below 580, you have a poor credit rating and you're at risk. However, if you have a score of above 800, you're exceptionally fit financially.
Well, the million dollar question is how long these credit scores will be used to determine your auto insurance premiums? However, there is no direct answer to this since there are many variables in consideration. On the other hand, most of these considerations might be determined in some cases and might vary in different states.