Certain consumers are unaware of the fact but there exists an inverse relation between your auto insurance premiums and your credit score. Simply put, the better your credit report the lower your vehicle auto insurance premiums and the worse your credit report the higher your premiums on automobile insurance. This might come as a surprise to you but nowadays motor vehicle insurance companies are paying more attention to an individual’s credit score than his/her driving record or type of car owned or where the car ranks on the list of most stolen cars. Auto insurance companies have adopted the practice of penalizing individuals with poor credit reports by, in certain cases, charging them up to 3 times as much the personal vehicle insurance premiums as their counterparts with better credit reports would pay.

Relationship Between Auto Car Insurance Premiums And Credit Report

Primarily it needs to be stated that not all auto car insurance companies determine the auto insurance premiums of an individual in conjunction with their credit reports. Big names in the insurance field like GEICO and Allstate in addition o others have adopted this practice. It is not known to the public as to what calculations or formulas are incorporated by automobile insurance companies while calculating the vehicle auto insurance premiums applicable to individuals. While motor vehicle insurance companies are extremely secretive about this, it might be interesting to know the rationale behind linking auto insurance premiums to an individual’s credit report. Vehicle auto insurance companies which have adopted the fore mentioned practice are of the opinion that an individual with a good credit report is under less stress and hence is a lesser threat on the road and a more unlikely candidate to meet with an accident. However individuals with poor credit reports seem to be under pressure and are not only a greater threat to themselves but are also a threat on the road. In addition to this they also pose the threat of not meeting their regular auto insurance premium commitments.

Vehicle Insurance Policy Options

In the event that you find yourself in a situation where the vehicle insurance policy quotes for your automobile are much higher than expected, do not panic, you do have a few options.

• Firstly, speak to your auto insurance agent and inquire as to which Tier you are on. It is mandatory for your agent to disclose this information to you if asked.

• If you find that your credit report is affecting your vehicle auto insurance quotes by and large, try and pay down short term credit like credit cards, personal loans or even vehicle loans to improve your credit score and thereby obtain a lower automobile insurance quote. It might also be a good idea to get your credit report to see if there are any more credit report errors that might have crept in.

• Please note that not all motor vehicle insurers charge you premiums based on your credit score. Shop around to gauge which is the better option. You just have to find the right insurer who does not pay as much attention to your credit report as some of the others.

Considering the fact that auto Insurance is necessary in this day and age, consumers should try and evaluate their options before settling in on an automobile insurance quote. Be careful that your vehicle auto insurance premiums are not inflated owing to your credit report. If this is the case, look for insurers (and there are insurers out there) who do not focus as much on credit reports as their larger counterparts. This might be the difference between you paying an acceptable motor vehicle insurance premium and you being grossly overcharged and penalized for your credit report.

References:

1. Can Your Credit Score Affect Your Automobile Insurance Rates? – Credit Report Advice
2. What is Insurance Credit Scoring? – Insurance Scored