Many U.S. car insurance companies use credit-based insurance scores to help determine risk. (Unless you live in California, Hawaii or Massachusetts, or where the practice has been barred.) Studies have shown that there is good reason to use credit based scoring in determining rates.
Credit-based insurance scores vs. credit scores.
Credit scores are determined based on information from your credit report and are used by lending institutions to determine how likely you are to repay a loan on time. Credit scores determine interest rates and loan qualifications.
Credit-based insurance scores don't factor personal information like your job, income history and gender. Car insurance companies use this information to help determine the likelihood of a future insurance claim.
Credit-based insurance scores work like this:
To establish eligibility for payment plans and to assist in determining insurance rates, most United States insurance companies use credit-based insurance scores along with your driving violations history, claims history, and other factors.
If your credit-based insurance score is high, you have an excellent driving history, and no claims on your record, you'll generally qualify for lower rates. Keep in mind, your score is only one of various factors used to calculate your premium. If your insurance score is excellent, but your driving history is not, you’ll probably be considered riskier to insure.
Why it’s used
First, we simply want to make sure you are not overpaying for auto insurance.
Additionally, research has revealed that credit scores can accurately predict accident potential. Statistical speaking, those with higher credit scores tend to get into fewer accidents and cost insurance companies less than their low scoring counterparts.
Kelly Lee Insurance
Car Insurance in Lake Charles, LA.