The cost of car insurance varies considerably between policyholders. A number of factors contribute to the difference, including driving record, vehicle age and type, and the age, sex, and marital status of the driver. Many aren’t aware of another factor that has a great deal of importance: credit rating. The information below explains how and why insurers rely upon this for pricing purposes.
How Your Credit Score Affects Car Insurance Premiums
Most insurers utilize a credit-based insurance score to determine car insurance rates. They look for favorable factors in your credit report, such as a long-established credit history, a record of timely payments, and long-term open accounts that are currently in good standing. People with these factors typically receive lower rates. On the other hand, negative factors might raise your premium cost. These include little to no credit history, a record of late payments or accounts that went to collection, a large debt-to-income ratio, and numerous recent credit inquiries.
Why Insurers Utilize a Credit-Based Insurance Score
Insurance companies spend a great deal of time and effort determining the risk of insuring various policyholders and have found a distinct correlation between the responsible use of credit and responsible driving habits. Nobody claims there is a causal connection—and nobody fully understands why—but the correlation is real. People with little credit history or poor credit tend to file more claims, receive more moving violations, and become involved in more collisions. Because they present a greater financial risk to insurers, these drivers must often pay more for car insurance coverage, even if all else is equal.
For expert help designing a car insurance policy, contact Lafever Insurance Agency in Cookeville, TN. They have been serving clients in and around Putnam County for more than 30 years, specializing in affordable insurance for people who have been turned away by other insurers. They offer SR-22 bonds and young driver insurance for higher-risk motorists. Their stated policy is, "No one refused!" Call (931) 526-3377 today to request a quote.