How Your Credit History Can Affect Premium Amounts for Your Auto Insurance Comparison.

If you've recently read a government-issued consumer guide about car insurance, you may have noticed that these guides often recommend online auto insurance comparisons as a way to shop for the best insurance policy. That's because the writers of the guides understand that most consumers lead busy lives and need a quick, easy solution to shopping for car insurance. The Internet enables anyone to fill in a short form and quickly obtain general quotes from as many as 10 to 12 insurance companies. Some companies might provide an instant quote while others will e-mail you with a quote and more information.



What you might not realize is that many car insurance providers will consider your credit history and/or rating when determining your premium quote. Credit bureau reporting of good credit/poor credit is no longer just a means of getting a loan or credit card. If you have worked hard to keep your credit score high, then your hard work may pay off for years to come by saving you dollars not only on loan interest, but also car insurance premiums.



Why Does Credit Matter to Car Insurance Companies?



It's plain and simple....there's a direct correlation between a person's credit/loan behaviors and the number of claims they may incur. Based on years of research, many insurance companies feel that consumers with a higher credit rating are less likely to incur high losses in insurance claims. Basically, if you pay your bills on time faithfully for years, then you're more likely to be a careful driver and of course, pay your insurance premiums on time as well. Not to mention folks with a high credit rating tend to be middle-aged or older, and therefore are in the safer driving age range!



Is it Legal for Car Insurance Companies to View Your Credit History?



Yes, it is perfectly legal under the Federal Fair Credit Reporting Act. This act states (in a nutshell) that consumer reporting agencies are to use reasonable procedures to meet the needs of commerce for credit, insurance, personnel, and other information. In other words, insurance companies have just as much right to obtain your credit score and history as do creditors and potential employers.



Though some car insurance providers will consider your actual credit reports, others may use what's called an "insurance credit score." This score is created using various factors such as your public records, type of credit you have including store cards, credit cards, finance company loans, etc., unused credit, open lines of credit, credit inquiries, past payment history, and the length of your credit history. This score helps predict the likelihood of anticipated insurance losses, sort of like lenders determining whether or not you are a high-risk borrower.



When you compare car insurance, be sure to ask how your credit score will affect your insurance premium with each company. If you have very good credit, look for insurance providers that put a lot of weight in credit ratings. This can give you leverage when obtaining quotes from these companies.



Keep in mind that there are other factors that will determine your premium when you compare auto insurance. Auto insurance comparison companies will also consider the type of vehicle you drive, your age, your driving records, where you live, and whether you are eligible for various insurance premium discounts. The type of coverage you need as well as your deductible will also affect your premium rates.



Car insurance comparison websites provide a wonderful opportunity to find the insurance company that's right for you. Take advantage of this free and easy tool, and use your good credit as a way to maximize your savings!