Credit Score
Does My Credit Score Affect My Insurance Rates?
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Everyone should be aware of the fact that your credit rating and credit score can impact your ability to finance a new home or car and affect your ability to get a decent annual percentage rate on a credit card, but few realize that the impact of your credit affects much more than just new purchases.
more car insurance companies are now taking your credit history into account when writing your insurance policy.
This is a pretty controversial subject, and for good reason. You purchase and maintain car insurance to be a responsible driver and protect yourself from financial loss.
One would think that prioritizing your insurance at the top of the list of your bills would ensure you have insurance, but that may not be the case. Some insurance companies are actually dropping clients that have paid regularly because they have dropped the ball on other bills, thus lowering their credit rating and credit score. Even companies that are not dropping their clients may still be capitalizing on others misfortune by making rates skyrocket as a response to your dropping credit score.
The laws and regulations that govern insurance companies are not federally set. Instead, each state has its own laws dealing with insurance companies and what information they are permitted to use when determining your policy premiums.
Your insurance company has a complex mathematical procedure they even they likely cannot explain to you, but it takes into account many factors including your age, gender, marital status, children, the type of car you drive, where you live, your driving record and often your credit score. This process assigns you a risk level to the insurance company, often based on their past experiences as a weighting measure. Your risk factor determines your premium amounts, a higher risk equaling a higher premium rate.
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