Why is your credit history important for car insurance?

Your credit history can get you a better insurance rate!

It may sound surprising, but there really is a relationship between the way you use credit and the way you drive your car and maintain your home.  And using credit responsibly can result in a lower insurance premium.

Never discount the value of a good credit history.

All insurance companies review relevant information about a potential client before setting a rate.  Your gender, age, driving record and experience, where you life and the make and year of your vehicle are just some for the things insurers consider to determine how likely you are to be involved in an accident and, based on that, how much you should pay for auto insurance.

The insurance companies have found that how you use credit is a good way to personalize your premium.  A high credit score has been found to lower rates to those who might otherwise pay more based on other criteria alone such as driving record.

Here are some frequently asked questions about how insurance companies use your credit history.

Q: What kind of credit information is reviewed?

A: Insurance companies look at several things, including the length of your credit history, the number of loans and accounts you have , your payment history, and the number of times you apply for credit.

Q: How do they use my credit history?

A: Your credit information is used to calculate an "insurance score". This score is used with your driving record, claims history, prior insurance history and other relevant information to tailor a policy and premium specifically to you and your insurance needs.

Q: Does the inquiry affect my overall credit rating?

A: No.  Insurance inquiries are not loaning you any money or extending any credit to you as a lender would.  They simply make a credit inquiry to view your credit score.  They will not impact your credit score.

Q:Is the insurance score the same number as the credit score that lenders use?

A: No. Credit scores are used by lenders to determined your credit worthiness based on how much money you have borrowed and your ability to pay it back.  Insurance companies look at how you use credit, such as the first time you opened a credit card account and the number of times you applied for credit.

Q: How can I improve my insurance score?

A: Always pay your bills on time, pay more than the minimum due, keep your credit balances low, and only apply for the credit you need.  Impressing your friends with lots of credit cards will only hurt you in the long run.

Q: How can I get a copy of my credit report?

A: You may obtain a free copy of your credit report once a year, and for 60 days after receiving an "adverse action" notice based on the use of your credit information.  For a free copy, call any of the following consumer-reporting agencies:

Experian..............1-888-397-3742

Equifax.................1-800-685-1111

TransUnion...........1-800-645-1938

Regardless of your insurance score you will always be able to obtain insurance, although your premium will reflect the results of your use of credit along with the usual data.  You can't out run your credit score so we encourage you to be a wise consumer and use credit in such a way that benefits you in your purchases and your credit score.