Car Insurance Estimate

The relationship between your credit and what you pay for car insurance was established after the claims records for millions of policyholders were examined. The records showed that more frequent and bigger claims were made by people with poor credit, than people with good credit. So if you have good credit your car insurance estimate is going to be lower than if you have bad credit.

Some people get concerned when they find out that an insurance company wants to check their credit record and wonder if they'll be judged like they were applying for a loan. But having a car insurance company rate your credit isn't like a bank. They won't look at your income. And they also won't consider your age, gender, marital status or where you live. But before they give you a car insurance estimate, the insurance companies want to see signs of how responsible you are.

In order to rate your credit, car insurers us a credit score. This is a formula that grades several areas of your credit to produce a single number that is an overall credit ranking. Companies use different scoring models but the formulas usually rate such things as, your overall debt, how long you've had credit, the number of accounts you have, your bill-paying history and if you've had a major financial setback, like a foreclosure. A car insurance estimate is a projection of your future risk to the insurance company. And the company wants to see what your past risk has been in order to gauge the future.