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Know the Connection Between Car Insurance and Credit Score

As commonly known, the personal history of the driver is one of the crucial factor deciding premium for car insurance. Of course, it is right, but there is one more factor that influences the premium- The Credit Score.

What is a credit score?

It is a three-digit number that designates a person's creditworthiness on the basis of his/her credit history. In other words, credit score describes a person's likelihood of paying loans.

Following key factors are used by the insurance companies to analyse the credit score of an individual:

  • Total credit history
  • Payment history of individual along with reasons behind delayed payments
  • Types of credits taken by the individual like a credit card or debt, etc.

Insurance companies consider the credit score of an individual to decide the premium for a car insurance policy. This article will help you to know the connection between credit score and car insurance.

The relation between credit score and insurance policy for the car:

The basic premium offered by insurance companies for their car insurance policies is estimated from the insurance score of that particular car. Insurance score is a credit rating by the insurers representing prospects of claims on insurance for different car models.

Many studies have provided the evidence about a correlation between car accidents and the credit score of the individual. Thus, the insurance score based on the credit history of the policyholder states the possibilities for claims on the insurance for road accidents.

It is suggested to maintain a high credit score; as good credit score helps in simplifying the claim filing for car insurance after an accident. Moreover, the individuals having good credit score get to enjoy more benefits with fewer terms on their car insurance policy. Car Insurance providers advise the policyholders to sustain high credit score for easy claim filing.

How does credit score influence the premium for car insurance?

The higher the credit score, the lower the premium on an insurance policy for the car. Insurance companies offer a lower premium to the car-owners having good credit scores compared to the individuals having poor or no credit scores. Moreover, a good credit score makes the individual eligible for various add-on features on the car insurance policy.  Whereas, a lower credit score makes the claim filing difficult to the individual.

The credit score is decided by excluding the factors like age, gender or income. It merely represents the tendency of the individual to be punctual while clearing debts. Paying bills on time, keeping low balances on credit cards and clearing debts on time improve the credit score of the individual.  

Lastly, just like car insurance online, one can check its scores with the help of internet. Car insurance based on credit score enable the insurance companies to quote the best premium to the purchaser. Maintaining a good credit score is the key to have the best car insurance with beneficial add-on features and simplified claiming process.