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How Your Credit History Affects Your Auto Owners Insurance Rate


When buying auto owners insurance, be aware that insurance providers will base premiums on your credit history, among other things. Companies use this information because it has been noted that a consumer’s credit rating is directly correlated to claims that will probably occur. A person maintaining a good score is financially stable and is deemed responsible, even while driving. Therefore, severe losses on the part of the insurer are less likely.

The Federal Fair Credit Reporting Act permits auto owners insurance companies to peruse your credit score in determining how much they will charge you. It is a fair and legal practice because insurers are also bound to use certain information about you with utmost confidentiality. In the United States, there are three recognized credit bureaus that provide information to the financial sector: Equifax, Trans Union, and Experian. A report from one of these bureaus will probably be the basis for your rate.

However, there are other ways that an auto owners insurance company determines your credit history. They employ techniques similar to how a lender predicts the reliability of an applicant. Here are some factors that will likely determine your score:

  • Public records of bankruptcy, foreclosures, liens and collections;
  • Length of time that you have been included in the credit system;
  • Records of past payments, if you have been late in paying your dues and the amount of time it took for you to pay it off;
  • Frequency of new credit application whether for mortgage loans, credit card accounts and utility accounts;
  • Types of active credits such as major credit cards, finance company loans and store cards;
  • Lines of credit and how much is still open for you; and
  • Comparison of how much you still owed versus how much credit is still available for use.

The basis is your general credit history, but once your insurer has finalized its check, the available information becomes insurance credit score already. Having said that, the investigation may yield different results depending on how much research the investigator has done and therefore, your auto owners insurance rate varies from company to company.

To get the best rate, do not discuss your needs with just one agent. Set a meeting with various agents from different providers and review each proposal presented to you. You might realize that some credit investigations are not as thorough as the others. Partner with one who can best provide for your needs while giving you the most competitive premium rate there is.

How Your Credit History Affects Your Auto Owners Insurance Rate