Credit Scores Directly Affect Auto Insurance Rates

July 26th, 2007 by Brad C

The Federal Trade Commission (FTC) released a report confirming a correlation between credit scores and the number and cost of claims a consumer is likely to file against their auto insurance policy.  The accuracy of credit scores means that car insurance companies can calculate rates that better predict risk, so that lower-risk consumers could pay lower premiums and higher-risk customers will appropriately pay more for their car insurance policy.

For years auto insurance companies have used credit scores to determine risk and subsequently determine auto insurance rates.  Many people protested this, believing that ethnic factors were pulled into the calculations.  Although ethnic patterns are apparent, credit scores are based strictly on an individual’s payment history.

This report could truly help high-risk customers since it will enable insurance providers to more precisely predict risk.  In the past when companies were less sure what to charge, they chose not to offer coverage to high-risk drivers.  Now it is much easier for insurance agents to calculate an appropriate rate and offer policies to individuals and families who could never buy coverage before.

Some automobile insurance companies place a higher value on credit scores than others, so it still pays to compare quotes on multiple policies.  And remember, there are many factors that determine auto insurance rates, including driving history, an insurance company’s experience in your area, the type of car you drive, etc.  We’ve put a list of ways to save on auto insurance on to show you the things you can do to affect the quotes you receive.

Listen to Credit Scores Directly Affect Auto Insurance Rates
Listen to Credit Scores Directly Affect Auto Insurance Rates

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