Auto Insurance and Your Credit Report
Most of us are aware that our driving history impacts not only our ability to get auto
insurance but the rates we pay as well. These days there is also another and equally
critical factor insurance companies use, our credit report.
Insurance companies consider your credit report and credit score as a valuable tool to
assess the risk in insuring you. A higher credit score reflects responsibility and
makes it less likely you will make claims against your policy.
A poor credit score may disqualify you from getting insurance with some companies. More
likely it will put you into an upper rate category with higher premiums for the duration
of that policy.
A recent study by the Federal Trade Commission concluded that 'Credit based insurance
scores are effective predictors of risk under automobile policies. They are predictive
of the number of claims consumers file and the total cost of those claims. The use of
scores is therefore likely to make the price of insurance better match the risk of loss
posed by the consumer. Thus, on average, higher-risk consumers will pay higher premiums
and lower-risk consumers will pay lower premiums.'
According to a recent industry survey over 90% of the top auto insurance companies use
credit data to evaluate new and renewing clients. Almost all insurance applications
now require you give permission to check your credit report. The insurance company
will request a report from one or more of the credit reporting bureaus; Equifax, Experian
The score used is created by a company
named Fair Isaac and Company and is referred to by different names at
the different credit bureaus; InScore® at Equifax, the
Experian/Fair Isaac Insurance Score at Experian, and the Fair Isaac Insurance Risk
Score® at TransUnion.
Credit scores range from 300 to 850 with the higher score being best. If your score is
below 620 to 650, you may have trouble getting insurance or may have to pay a higher