Cheap Auto Insurance

The reason that your chance for a cheap auto insurance rate is tied to your credit, is due to studies of millions of insurance claims. The results of the studies showed that on average, larger and more frequent claims were filed by drivers with poor credit as compared to the claims for good-credit drivers.

Auto insurance companies usually use a credit scoring formula to rate your credit. But unlike applying for a loan, this credit score doesn't take into account your income. Nor does it include your age, marital status or gender. The credit score grades certain parts of your credit report and although insurers use different formulas, they look at similar items. Rated items may include the number and ages of your credit accounts, the size of your total debt, whether you own or rent your home and how you've paid your bills. And of course, if your report shows a bankruptcy or foreclosure, you have little chance for getting cheap auto insurance.

It's estimated that over 90% of all auto insurance companies make your credit part of their policy-granting process. So if you want cheap auto insurance, it's important you know if your credit is having a negative effect on your premium. And even if your credit is spotless, clerical errors are common and can cause you to be penalized unfairly. So it's a good idea to ask if and how your credit is affecting your rate. If there is a problem, you can also find out what steps you can take to correct it.