Insurance companies use many factors to determine your rates. Most insurance companies rate factors include things such as age, gender, number of accidents and tickets. What is largely unknown to the public is that some insurance companies also check your credit score to determine your insurance rates.
Because each insurance company rates its customers differently it is not fully known how they use your credit score to determine your rates. It is generally accepted, however, the lower your credit score the higher your rates will be. You could see this increase as just a general increase or as a discount that you are ineligible for.
The insurers that use your credit score to determine your rating do it because they have found a correlation between a poor credit check and an increase in claims. In other words, they have statistics that show that those with a low credit score to be higher risk drivers that require an increase in premium to make up for the increased risk the insurance company is taking on.
As far as insurance rating goes, the higher risk you present the higher your auto insurance costs will be.
Now you might be thinking “how can they get away with this?” Well the sad part is insurance companies have received governmental approval from the Federal Fair Credit Reporting Act which gives insurance companies the right to use your credit score against you in a “reasonable” manner. You can read the entire act here.
If you have an error on your credit score and you believe it is adversely affecting how much you pay for auto insurance. It is highly recommended you check your credit score and present your findings to your insurance company.
Some insurance companies will change your rating right away and even refund you the difference while others will require you to wait until renewal to make the required change. Whatever the procedure, it is up to you to discuss with your insurance company your options.
It is recommended that if you do have en error on your credit score and your insurance rates have increased as a result, you should first have your credit score corrected and then talk to a manger at your insurance company to have your rating changed.
Since insurance companies do not want to divulge that information for competitive reasons. A strategy those with a poor credit score would do is avoid larger insurers as they tend to have the resources to perform regular credit checks on you.
However, this method may no longer be viable as the cost to obtain credit scores has gone down significantly.
If you would like to compare quotes, you can compare auto insurance without credit check by using our car insurance rate calculator. Compare insurance quotes with no credit check.