Car Insurance 101 - Check your credit report before you shop

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Car Insurance 101 - Check your credit report before you shop
1 year ago
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If you are new to the car insurance game you may naively assume that car insurance companies are only interested in how well you drive. In some cases that is true, but a surprising number of car insurers also consider how well you handle your finances. So if you are shopping for a new or replacement car insurance policy it may be a good idea to pull a copy of your credit report first. Knowing where you stand will help you avoid any unpleasant surprises and keep you from paying more in premiums than you have to.

Why Do Companies Factor in Credit History?
At first blush it seems counterintuitive for a car insurance company to consider an individual?셲 credit score when determining what premiums that applicant will be charged. After all how you handle your money would seem to have nothing at all to do with how you handle the wheel. But industry funded studies have indeed found a correlation between how an individual driver handles his or her finances and the likelihood that individual will file a car insurance claim. Whether this is just a coincidence or a true connection, many car insurance companies have used those studies as justification for factoring in credit scores and credit histories when they write policies and determine premium levels.

Know What the Insurer Knows
Fortunately there is a simple way for individuals to get a jump start on those insurers. By ordering a copy of their own credit reports and finding out their own credit scores drivers can spot potential problems and seek to resolve them before the insurer sees that information. Keep in mind that it is not unusual for credit reports to contain errors, so even if your credit history is clear and you pay your bills on time it is a good idea to check your credit report before you apply for car insurance.

If you do spot an error on your credit report you will have time to contact the credit reporting agency and ask that the erroneous information be removed. If your credit report shows legitimate negative information it may not be possible to remove it, but you always have the option of looking for an insurer who does not consider your credit score when determining rates. Not all car insurance companies take credit scores and credit histories into account, so it is important to shop around if your credit is less than perfect.

Whether it is fair or not many car insurance companies continue to use credit scores and credit histories to determine the premiums their policyholders and applicants will pay. By knowing what those credit reports have to say you can be proactive and arm yourself with the information you will need to get the most coverage at the lowest possible premium.
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