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Q

Why do the insurance companies require a credit check? What does my credit history have to do with my driving history? It is ridiculous that they base the amount of the premium on my credit history rather than my driving history. I happen to have a very clean driving record.


A

Insurance companies run credit checks on applicants because risk assessors and actuarial studies have shown that a person's credit or financial history is a good predictor of insurance claims. Actuaries have found a strong correlation between credit history and insurance claims, and they have been taking credit history into account for some time in states where it's legal. We have noticed that some are even using more parts of the credit report (like payments over 30 days late) to pinpoint better risk assessment.

Insurance rates are not purely calculated based on credit history. There are other variables such as where you live, the type of car, driving record, etc. The goal of getting all of this information is to correlate the insurance premium rate as closely as possible with the actual cost of potential claims. If you are able to continue to have a clean driving record you should see if your insurance company allows for a safe driver discount or other discounts that will help absorb the higher rate due your credit rating.

There has been a noticeable shift toward lower rates that can be pinpointed to using credit along with many other rating factors. In the past, most insurers based premiums on a few rating factors like type of car, place of residence, age, marital status and driving record. Now most companies focus on at least 30 or more factors. Most companies always used the seven main components of a rate; now many have expanded that number to 300 or more. As a result, drivers with the best records have seen their rates drop as much as 25 percent. The ability to better pinpoint risk, saves all drivers in insurance costs.

But even people with poor driving records are likely to benefit. In the past, drivers with multiple accidents or major violations were only insured by high-risk insurers that charged hefty premiums because mainstream companies didn't have a system to price or manage them. Because of the ability to price and tier all drivers into a profitable pool, many companies are offering to cover the higher risk drivers, sometimes at much lower rates than those of high-risk insurers.

We do have some carriers that don't use credit for rating purposes.

If you would like to comparison shop now and see if you can find a lower auto insurance rate you can do that here.


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10 Responses to "Why do the insurance companies require a credit check? What does my credit history have to do with my driving history? It is ridiculous that they base the amount of the premium on my credit history rather than my driving history. I happen to have a very clean driving record."
  1. Anonymous

    I do not believe checking your credit is fair. I have not been in a wreck, received a ticket or made a claim in over 10 years. Insurance companies should only check your driving record. That's what counts anyway. I have my premiums automatically deducted, the premium is never late. Is this another way to nickel and dime us to death?

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  2. Anonymous

    Have you people not noticed that the insurance companies have a lot more control now then 20 yrs ago...thanks to bill clinton being greedy have gave them full control.. you cant buy a car with out it, you cant get your license with out it.. I'm waiting for walking insurance or bicycle insurance to be mandatory. I have been hit 2 times by non insured my rates go up due to them hitting me. They get to walk away. My house burns down and insurance company won't cover you have a nice life.

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  3. Anonymous

    They have no right what so ever to look at my credit..None. I dont care about those damn studies...it all started with good old nasty bill clinton.. thanks to him you must have insurance.. what happen to thhis being a free country.. the world hates us. have you not noticed thanks to bush for that.

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  4. Anonymous

    i think it crazy to use credit report on your insurance i have a clean driving my husband has clean driving and my daughter does also but the insurance is higher because of the credit its not our fault that we had lost our jobs and had trouble in the past and know they are pentlizing us for it know so my question is why have a good driving record

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  5. Anonymous

    We know that "other" factors are included in figuring your insurance rate. What right (or legal recourse) do thay have to do this? Why do some companies check your credit when other companies do not? I was told by a financial planner that insurance companies are not allowed to do this. This seems an incidious way to extract more private information on you which can be viewed by who knows how many others. Weve paid our insurance premiums without fail for years. Insurance companies have always been a racket. You pay and pay on the off-chance you might need it. And yet, theyre legally required. I consider this harrassment.

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  6. Anonymous

    Driving record has absolutely nothing to do with credit, insurance companies are always looking for a gimick to over charge and everyone is very much aware of this. I have written to my State Attorneys office with this concern. Everyone I know feel the same. We are sick and tired of being overcharged, especially in Connecticut. I will continue writing to everyone including newspapers.

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  7. Anonymous

    judging a persons driving record based on credit is totally lame, we now have poor credit due to our newest sons medical bills, but my wifes driving record is clean and mine has a couple speeding tickets. our rates have continued to go up every 6 months with the same company weve had for the last 4 yrs. when i asked them why our rates havnt stayed the same or dropped they told me that they have been dropping but the yearly inflation of all things has made the payment rise. Total B.S. somone needs to pass a bill making it illegal to pull a credit report for auto insurance. as long as i pay my premium im holding up my end if i dont they cancel me! simple as that. ive had the same insurance co. screw up our policy 2 times in the past 4yrs should i base my rate on there service?

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  8. Anonymous

    I dont think that its is right at all for insurance companies to do credit checks with a individual that has been with there company for over 4 years. And decide because he has bad credit to go up on the person insurance . That is discrimination.

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  9. Anonymous

    The usual company line. I have been driving for 33 years, no driving infractions, no accidents, no tickets, and how I pay my bills has absolutely no bearing on how I drive. Do you people actually think anyone buys this lie? Its just another way to amass more personal info on everyone.

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  10. Anonymous

    Thats bull I never had an accident and have never put in a clam... Its just more bull like everything else that is going up an ways they can take more an more Soon people will rise up an end all this

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