Can Your Credit History Affect Your Car Insurance Premiums

Many insurers will use your credit history to determine the rate of premium so remember when you are buying new car insurance; you must make sure that you have a credible score. Unless you have a good credit history, insurers may not consider you a very good client. The reason for checking your credit history is because they believe; a person with a bad or weak credit history is more liable to make higher insurance claims as compared to a person with a better credit score. Hence, your credit history becomes an important determining factor for some insurers.

While some car insurance companies will look directly into your credit reports, which they are allowed to do by law, but in a fair and confidential manner that is required for determining their insurance policy rates for an individual, others may do it indirectly. Instead, they use a statistical technique that will foretell the possibility of risks, based upon which they will see how risky or safe the client is and accordingly set a premium rate for the person. While using credit history to work out premiums, insurance companies rely on several sources of information such as payment history, public records, types of credits used and many other factors that tell them about your financial status.

If you have a poor credit history, it is better to avoid insurance companies that use credit history as one of the determining factors for your premium. Since there are so many insurance companies out there, it is not difficult finding one, which does not use this criterion. Apart from using your credit history to determine the rate of premium, the insurers will also use all the other factors that are used by car insurance companies to determine premiums for every individual.

These include your age, sex, and area of residence, type of car used, security installations, chances of thefts and vandalism and many other such factors that help them decide the risk factor for each individual. If some or all of these factors work in your favor, you can even be entitled to a lower premium rate. So it is important that you know of all these factors when buying car insurance. Last but not the least; compare car insurance quotes before you actually get down to buying a policy. This will help you find a policy that suits your pocket and is beneficial too.

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