Why Does Bad Credit Affect Car Insurance?

  1. 21750 POINTS
    Jim Winkler
    CEO/Owner, Winkler Financial Group, Houston, Texas
    That is an excellent question! There are a couple of reasons why auto insurers look at your credit score (and other insurers, btw...) and payment histories. The first should be pretty obvious - they want to make sure that they will get paid, so the more likely you are to make on time full payments, the less risk to them. On the other hand, if the risk of not getting payments on time, or receiving partial payments will cost you more in a higher premium. The second reason is a little more subtle. The assumption is that having poor control of your finances is an indicator of the possibility of not being in control of other areas of your life. If you take risks with your money, maybe you take risks with your car, or your health, etc. If you are prone to taking those sort of risks, then the companies risk also increases, as will your premiums. If you have issues with your credit, be sure to explain them to the agent, many will find a way to work with you. I hope that helps, thank you for asking!
    Answered on December 3, 2014
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  2. 0 POINTS
    Ruben Romero
    Owner, Entrust Insurance Agency, Bronx NY
    The reason is just liked mentioned above. To see if they will get paid and how responsible are you. I have this questioned asked when someone is looking for full coverage and what surprises is the everyone check your credit. Buying an I phone? Buying a car? Leasing a Car? Renting an Apartment? Buying a home or condo? Asking for a Loan?. So out of everything i just mentioned the only thing that pays out in the event of an occurrence is Insurance. So why wouldn't they check your credit? Remember when your asking for a quote online or over the phone and they say"we have to run a financial responsibility check" that's a soft check that the company is doing. Almost every carrier that i represent now and have represented across five states in the past check credit. My suggestion to you is let the agent or company know if that the issue so they can tell you upfront if you qualify or not. Thank you and good luck.
    Answered on December 24, 2014
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  3. 14231 POINTS
    Tom Sheehan
    Agency Owner, The Thomas G Sheehan Agency, 27 Glen Road Sandy Hook, CT 06482
    Over the years car insurance providers as well as providers of other insurance solutions, have evolved their underwriting review practices in order to better evaluate the risk they are being asked to insure. Many years ago things like the color of a car or whether it had 2 or 4 doors would affect the premiums paid. These days, hoewever, insurance companies are much more sophisticated intheir evaluation rocedures and many have included credit history when evaluating an applicants; request. Simnilar to one's driving record and accident history, a credit report can help an insurance companyu to better understand the risk factors of one's life style. Thus, a better credit history, along with a clean drigving record, hepls an insurer to feel more confident that they are insuring a person less inclined toward risky decisions.
    Answered on December 31, 2014
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