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The Surprising Factor That Can Increase Car Insurance Rates

iStock_000033988744_SmallWhen you’re shopping for car insurance, you’re probably already aware that your driving record will heavily impact your rate. But there is another very important factor that can often work against you when it comes to car insurance premiums: Your credit score.

This might surprise you, because you think of your credit score as something that impacts your ability to get a mortgage, car loan, or credit card. But insurance companies also check your credit score when you purchase car insurance. This is because even though insurance companies differ in their methods of computing your premium, nearly all of them have discovered that credit scores tend to be an accurate indicator of your risk level.

Your driving record may indicate that you’re at higher risk of causing an accident. Likewise, according to various studies used by insurance companies, a poor credit score can indicate that you are more likely to file a claim on your car insurance. Insurance companies determine premiums based upon risk of claims, so any factor which increases the likelihood of a claim will also increase your premiums. If your score is low enough, some insurance companies may even deny you coverage.

If you’re having trouble with obtaining affordable car insurance, check your credit rating. If you find items on your credit report that you suspect are incorrect, send a written dispute to the credit bureau. You may also discover a bill or two that you had forgotten, and once you pay them your score can begin to improve.

Keep in mind that insurance companies all have different methods of computing risk, and remember to keep your driving record clean.