As you shop for car insurance, you understand the importance of shopping around, checking for possible discounts, and having a good driving record in order to get the best rates. But did you know that your credit score can play a significant part in determining your monthly premium? Insurance companies routinely check the credit scores of potential customers before issuing a policy and this information is used to assess risk and help determine premium rates.
What Do Your Habits Have to Do With Credit Score and Auto Insurance Rates?
Your credit score is determined based on the number of credit cards and loans you have, how much debt you have on those cards and loans, and how faithful you are in making your payments each month. When you’re applying for a new loan, the salesman will most likely check your credit score before you are approved to see if you have a history of paying your debts responsibly. Someone who has missed payments or has accumulated extremely high debt totals may have his loan application denied or may not be approved to purchase a car or house. Companies consider credit score to be a reliable indicator of how trustworthy you are as a customer and how likely it is that you will repay the loan as the agreement indicates.
How Do Credit Score and Auto Insurance Rates Interact?
The relationship between credit score and auto insurance rates may not be immediately clear; however, auto insurance companies consider credit score to be an indicator of your potential risk as a client. Although it may seem as though credit score and driving habits are unrelated, insurance companies have found that a person’s financial situation can be a reliable indicator as to how well he cares for his possessions and how cautious he is across the board. Studies have shown that people who are responsible with their finances also tend to be responsible in other areas of their lives, including in their driving habits.
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