May 24, 2010

Know Your Credit Rating When Looking For Auto Insurance

When applying to receive auto insurance quotes, it would be best to know what your credit rating is. Many auto insurance companies will consider your credit rating when determining the cost of your insurance premium. So if you are currently shopping for auto insurance quotes, keep in mind that most insurance companies will be looking at your credit information.

The reason why insurers will look into your credit history is because of the correlation between an individual’s credit-related behaviors and any insurance claims that may occur. Insurance companies feel that customers with good credit behavior have less chances of incurring insurance losses.

Insurers that will be giving you your quotes will take into consideration a list of many factors. Some insurers will employ a different set of qualifications than other companies. This will include: age, driving history (number of accidents and violations) marital status, and car model information. As mentioned, companies will also look into credit score. Those with low credit scores are more likely to be involved in accidents as opposed to those with better credit. Insurers will partly base your auto insurance quote on your credit score. The higher your credit score, the lower your insurance quote. So if you have yet to establish your credit history, those insurance companies that consider credit scores may not be appropriate for you because you may not be entitled to receive certain discounts, which may result in much higher premiums.

When determining your insurance rate, some companies will directly look into your credit reports. This is usually referred to as insurance credit score which is determined by utilizing statistical methods in predicting your likelihood of having a higher than expected insurance loss. Companies use several factors in calculating your credit score. Some of them are: public records involving foreclosures and bankruptcy, payment history (frequency and number of late payments), length of your credit history, number of times you inquired or applied for accounts and new credit, number of credit cards you own, type of credit cards you use, and your unused credit which refers to how much you owe as opposed to your available credit.

Your calculated insurance credit score will more likely differ from one insurance company to another, as each insurer will be employing a different set of factors in calculating your insurance premium. As the term insurance credit score suggests, such rating encompasses several other factors aside from credit. And since each insurer will be using different methods in determining your score, it is difficult to determine what exactly a good credit score should be. However, it should be your aim to acquire good credit score because a good credit score usually results in much lower insurance premiums.