Higher Insurance Premiums and Bad Credit Articles | Automotive

By: Cargoyle

If you have bad credit the chances are that you’re probably paying a whole lot more for your car insurance than people with better credit ratings. Auto insurance companies are using the credit information of individuals in order to determine the susceptibility of people to becoming risks in terms of their ability to pay debts. This means that you have a lot more people paying substantially more for car insurance than they ordinarily should.

What’s An Insurance Risk Score?

Insurance risk scores are calculated from a number of things which are used to determine the stability of an individual. When insurance companies use credit scores to determine insurance risk, they care about various things such as how regularly people pay their bills and how much they may owe. It is also used to identify customers that are responsible and reliable at the same time. Insurance companies have paid for studies which have which show that the more responsible a person is with their bills; the more responsible that they will be with their cars and the less likely they are to cause accidents. These studies have shown a direct correlation between people who have high credit scores and low insurance claims.

Certain companies and their agents aren’t using these credit scores to determine insurance rates but the eligibility of people for insurance. If you want to find out how your insurance company is making use of your credit information to determine your insurance rates, you should try contacting your agent. 

How Is Credit History Used To Determine Insurance Risk?

Insurance establishments will look for certain things on a persons credit score in order to determine whether they are an insurance risk or not. These things are: 

1. Past payment history – Does the person in question pay their bills regularly or not? Have they ever had liens placed against them or claimed bankruptcy? All these things may end up affecting your insurance scores.
2. Amount of credit owed. How many accounts does a person have? How close are these people to their credit limits and what sort of accounts are these accounts?
3. How long is their credit history? This fact looks at how a long a persons credit history is and what specific accounts do they have?
4. New credit. This fact looks at the number of accounts that he has and the way they were established.
5. Types of credit. Does the person in question have outstanding credit cars, store credit, home loans and school loans?

The basic thing is that auto insurers are looking for things other than your driving record in order to determine the sort of person that you are. They want to see the different things that show how stable and how responsible a person is. By doing this they hope to get a person who has fewer accidents, less claims and lesser costs for their company over the duration of their coverage. This means profit for them and lowr insurance costs for the person that is being covered.