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Credit Ratings Checks & Insurance
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Credit Ratings Checks & Insurance

When it comes to finding affordable car insurance, your credit score may play a role in the price you pay for your policy.

Many car insurance companies now use your credit score or insurance credit score to assist in determining your risk-factor as a driver, and to help ensure that you’re not overpaying for your car insurance. However, if you have bad credit or no credit history, you could pay higher premiums for your policy and some companies could choose not to insure you.

What's a credit rating?

Credit ratings are different from insurance credit scores. A credit rating is based on your ability to repay amounts you have borrowed. When banks and other lenders determine credit ratings, they may factor in your:
income,
job history
Debt history
and other matters that might affect your ability to repay a loan.
Lenders then use this to determine whether you are eligible for a loan, the amount you qualify for and what interest rate you'll be charge

A credit rating is different from an insurance credit score. A credit rating is based on your ability to repay amounts you have borrowed. When banks and other lenders determine credit ratings, they may factor in your income, job history, debt history, and other personal information that could affect your ability to repay a loan.

Lenders then use this number to determine whether you are eligible for a loan, the amount you qualify for, and the interest rate.

What's an insurance score?

An insurance score is an objective and consistent credit-based statistical tool that insurance companies use along with other applicant information to help us accurately assign the best price available for your policy.

To determine your insurance score, an insurance company might look at your credit score, past driving history, and your claim history.

Credit Checks vs. No Credit Checks

Some auto insurance companies use credit checks to obtain a driver's rate and insurance score, and determine the best rate for that driver. Still, other companies offer "no credit check insurance."

A poor driving record and bad credit can make it difficult to find cheap car insurance, so it might seem like a “no credit check insurance company” is the best option. But, those companies often charge much higher rates than those that perform credit checks. It may be worth shopping and comparing quotes with both types of insurers to secure the best policy rate.

How to raise your credit score

You may have a spotty driving record, or even gone through some hard economic times, but you can still clean up your credit score to get the best deal on car insurance. Here are a few tips to get your rating back in shape.

  • Pay your debts on time. Set up payment reminders on your phone's calendar or request they be sent to your email.
  • Don’t borrow the maximum amount on your line of credit.
  • Don’t open new accounts. This could temporarily drop your credit rating. The same goes with closing multiple accounts at once.
  • Check your credit report at least once a year to make sure it doesn't have any errors on it. If you find errors, follow the reporting agency's instructions on how to correct them.
  • Contact your creditors if you're having trouble making your payments. They may be able to offer you different payment options.

How to get your credit score/insurance score

You can get your credit report for free each year by visiting annualcreditreport.com. Knowing what your credit looks like can help you keep track of your rating and keep up with outstanding accounts or marks on your report.

For more information, or to get a free quote with Direct Auto Insurance, visit one of our locations, get a free quote online or call us at 1-877-GO-DIRECT (1-877-463-4732).

Helpful Resources

 



 
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