Why Car Insurance Companies Check Your Credit

It's not just your age, driving history or the cost of your car that impacts your auto insurance premium---your credit score can also cause your insurance company to quote you a higher rate.

History

Although it's only gotten publicity recently, auto insurance companies have been using credit scores to help determine rates for over a decade, writes Sandra Block at USAToday.com. Your credit score may already be impacting your premium.

Reasoning

Studies show that drivers with poor credit ratings are more likely to file insurance claims, Block reports, possibly because they are less able to afford smaller repairs that others handle on their own in lieu of submitting a claim.

Indications

Manipulating your driving record can be easier than manipulating your credit report. A tarnished credit rating warns an insurance company a driver has an unpredictable lifestyle.

What Factors Matter

Some insurance companies care about the numeric score, while others are only looking for red flags, such as bankruptcy.

The Upside

While a low credit score can lead to an increased premium, an excellent credit score coupled with a mediocre driving record can actually decrease your auto insurance rate.

References

• USA Today: Bad Credit Can Inflate Car Insurance Premiums