How Credit Rating Can Affect My Rates?

By Author: Marcus Stalder
Total Articles: 491
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As you already know there are many things that will affect your insurance rates. Insurance companies use different factors when determining their rates and each factor has a certain weight in the final quote you receive when shopping around for a policy. While most of the factors you have to indicate in the quote form are quite clear in what concerns their connection with vehicle insurance others may seem like being out of place and cause a lot of questions to be asked by inexperienced insurance buyers. One of such factors is the driver's credit rating. A lot of people find that it's wrong for the insurance company to use their credit rating when calculating rates as it doesn't have any connection to insurance. But if you take the time to learn the details the link becomes very obvious.

Let's first talk about car insurance from the provider's point of view. The most important aspect of providing insurance of any kind is assessing the risk of insuring every new client. All the people are different and if one client may never need the coverage another car owner may file several claims in a single year. Each claim filed ...
... means that the coverage will be paid out by the provider and that's usually a lot of money. That's why it is very important for the insurance provider to be able to determine the risk associated with insuring each client separately. There are different factors being used when doing so, which were observed to be statistically linked to the probability of a person to file a claim. And at a certain point specialists have made an observation that the likelihood of filing a car insurance claim is strongly linked to the person's credit rating.

People with a good credit score have been observed to file insurance claims far less often that those with a poor credit rating. And as the score reaches the opposite extremes the relation becomes even more pronounced. Specialists speculate that the ability to organize own finances can tell us a lot about a person and how he or she is driving a car. People who tend to be well organized and have good credit ratings take less risks while behind the wheel, do not tend to exceed the speeding limit or perform any other traffic violations, which in turn reduces the risk of such drivers ending up in an accident. People with a poor credit score, on the other hand, are less organized and tend to be reckless on the road which eventually increases the risk of them having accidents and filing claims respectively.

Now, some of you might say that it's illegal to use a person's credit report for the purpose of car insurance risk assessment. However, insurance provider have the legal right to inquire for a credit report on a particular person even without the person knowing it with the condition of non-disclosure to third parties. Still, if you're worried by the fact that someone uses your credit rating without your consent or feel that your score isn't that beneficial for your car insurance rates there's still a possibility to find a provider who doesn't use credit scores when calculating rates. There are such companies all across the country so you have the option of purchasing your policy from them as well.