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Information On How Car Insurance Companies Can Legally Use Your Credit Score

Every driver who is over the age of 18 has a credit score. Now by law, most of the 50 states allow for car insurance companies to use a driver’s credit score when they are underwriting an insurance policy. It is important for all drivers to understand how car insurance companies utilize their credit score.
Your credit score will show the level of responsibility that you take with your finances.

Yes, many people are behind on their monthly bill payments right now due to the ad economy right now. However, car insurance premiums have to be paid on time each month in order for the company to have enough money in the pool to pay out their claims so your score does mean something to them. The higher your overall credit score is the lower your car insurance premiums will be. 

It is important for drivers to know that a change in the wrong direction with your credit score will never cause your car insurance policy to be cancelled.  Insurers are also barred from using the score to deny you the ability to become insured with their company.When your car insurance policy comes up for renewal, your insurance company can examine your credit score again. For example, a state such as Michigan uses the score when determining if a premium rate increase is needed if a person has a credit score that has dropped significantly.

Each car insurance company must by law disclose to car insurance coverage applicants that their credit report will be run and that their score will impact their premium rates. The number of times that your credit history has been checked should have no bearing on your ability to get or keep car insurance coverage. 

It is important for all drivers to consider making positive changes to their credit histories so that they can get the cheapest car insurance premium rates that they can. If you currently have car insurance coverage then you might not want to switch providers until you can begin to make some adjustments in the right direction.

It is best to pay off any delinquent accounts that you have first because these will be listed under the negative items section on your credit report. If you can get rid of these items in a few months then you can increase your credit score and then begin to reduce the load of consumer debt that you carry.

It is also a good idea to make sure that you have your car loan in good standing if you have one. If your car insurance company sees that you are not paying your car payments on time then they might not think that you will pay your insurance premiums on time as well.