Yes! Bad Credit Can Affect Your Car Insurance Rates

By Mike Wayman

Not only your ability to obtain a home mortgage or credit card depends on your credit rating, but now your auto insurance rates also can be affected either positively or negatively by your credit score. For about the last ten years, insurance companies have used applicant’s credit reports to help determine the potential risk of providing auto insurance. A negative credit rating is perceived as a higher insurance risk, while a higher credit score is perceived as a lower risk applicant and therefore could very well result in lower insurance rates.

The problem is that there are inconsistencies with this whole idea. It seems erroneous to assume that if a person has a high credit rating, hence it is assumed they either earn a high wage and/or have few expenses, that they are necessarily a more responsible or capable driver. Conversely, it seems ridiculous to think that those who earn lower wages or who have encountered financial difficulties resulting in a lower credit score will automatically be poor drivers and thus a higher insurance risk. But this is the way insurance companies are viewing credit histories with regards to prospective clients.

Of course, driving history is indeed considered as well, so maintaining a clean driving record will help even if your credit rating is low. Avoid accidents, pay any citations in a timely manner, and hope that your insurance agency will weigh more heavily on the side of your ability to drive than on the money in your pocket.