How Bad Credit Affects Car Insurance Rates

We came across this recent article in The Palm Beach Post about how credit scores can affect insurance rates and it’s definitely true. And that’s regardless of how good a driver you are or how clean your record is.  An average car insurance premium can easily double or triple based on poor credit.

Auto Insurance and Credit Scores throughout the Country

Those with good credit scores think it’s fair to take credit scores into consideration when it comes to auto insurance rates. Good drivers with poor credit scores, on the other hand, think it’s unfair because it’s irrelevant to driving habits – and thus, it should be banned.

Although not all states (California, Massachusetts, and Hawaii) consider credit scores as determinants for premiums, not many drivers are aware that they can be a possible factor. According to an insurance analyst, more than 95% of insurers use credit to calculate auto insurance rates.

Arizona has a 225 percent difference in premiums for those with excellent and poor credit. Meanwhile, North Carolina only has a 50 percent difference. Florida, on the other hand, comes near the middle of the extremes.

However, it is important to note that not all insurers have the same way of using credit scores for their rates. Some may use it for underwriting or when a new car is added to the policy, while others may use it to determine rates or for routine evaluation. The differences in the way credit scores are used make the auto insurance industry competitive. Also, it gives customers more options.

Many insurers may not tell you how they use credit scores for their premium calculations. However, they must disclose rates for each variable they use, including credit reports, annual mileage, location, and age.

What Can You Do?

If you have poor credit rating, the solution is pretty obvious. Improve your credit score by paying off your debts and correct errors on your credit report. While insurers may have their own scores, you can use the information from other resources to know whether you need to improve your rating or maintain it.

To know more about car insurance, Robert Nichols Insurance Group is willing to help you. We offer quality services to our customers whether you need help in making a claim or understanding your coverage. Call us at (561) 406-6153 or visit us at our office today. Get a free auto insurance quote from us!