Did you know that credit scores determine insurance rates? Many studies have shown that a person’s credit rating effects whether they might actually file an insurance claim. Those with a lower credit score tend to file insurance claims more often than someone with an excellent credit score.
The University of Texas did one such study based on 175,647 auto insurance policies. The study concluded that those with lower credit scores had more auto insurance losses. And a higher claims payout and posed a greater risk than those with higher credit scores. Auto Insurance Companies have caught on to this. They may charge you a higher or lower auto insurance premium based on your credit history.
Remember, your credit score or FICO score is a number that ranges from 300 to 850. It is evaluated from the various information that is in your credit file. Your FICO score is used by a lender to help them determine whether you might qualify for a particular credit card, loan, or service.
Most credit scores estimate the risk a company incurs by lending you money or providing them with a service. In other words, the likelihood that you would make your payments on time in the future. The higher your credit score, the less risk you represent to a lender.
Keep in mind that the credit score number you saw last year, or even last month. Was a snapshot of your credit file at that moment in time. Credit scores are fluid and can change anytime your credit report file is updated with new information.
Credit Scores Determine Insurance Ra
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If you have a high credit score, and a great driving history. Zero claims on your driving record, you should qualify for lower auto insurance rates. Your score is only one factor used to calculate your auto rate. If you have a great credit score but a shaky driving history you will be considered a higher risk to insure.
Start today by getting your annual credit report and see where you could begin saving money on your auto insurance.