Too often I hear insurance companies advertise how proud they are about not using credit as a rating factor in an auto insurance quote. I then receive a phone call from a customer asking me if I am going to run their credit and confess to me they just took a hit on their credit score.
The reality is that credit is a good method to measure risk. Don’t stop reading this if you have less than perfect credit!
Don’t Forget, this article is meant to help you understand how credit affects your rating, so don’t get upset with me yet!
Why do insurance companies use credit to determine if I am a good driver? Insurance companies do not determine if you are a good driver based on credit. Insurance companies determine you are more prone to make a claim if you have lower credit. There is a correlation between bad credit and financial instability. Example: If somebody is financially unstable, they are more likely to not perform preventative maintenance on their vehicle such as new tires or new brakes.
Now, most people will probably replace their tires and brakes, but if one out of 1000 in the bad credit category has a tire blow out and they severally injure somebody, the insurance company will loose money.
What is the solution?
Most (if not all quality insurers) run credit. Depending on the financial stability of the company, a specific insurer may be more open to accept a customer with lower credit. My recommendation is for you to shop you rate until you find a quality insurer who will not consider your less than perfect credit as high risk. You can do this online or call a local independent agent who usually represents more than one company. One of these companies may give you a better price!
Don’t Fall in the trap of cheap advertisement!
Please don’t fall in the trap of advertisements, “we don’t run your credit.” With my experience in the insurance world, not running credit usually means the insurance company is selling a limited product, which opens up loop holes for the insurance company to not pay a claim. Companies with a bad reputation and possibly a low rating tend to advertise like this and offer inferior coverage to the people who most need insurance protection (sad news).
Keep in mind, credit is not the only factor in your insurance rate. Folks over 30 (all else constant) can usually get away with an excellent rate although they might have bad credit. It all comes down to responsibility, and we can all admit that over all people over 30 might be more responsible than somebody in their 20’s.
For more information contact your local independent agent, Texas Prime Insurance or visit our Progressive Insurance dedicated website.