Your Personal History Isn’t Personal
It’s a fact of life that in today’s modern world your personal information is available to organizations and individuals who have a legitimate reason (and sometimes not so legitimate reasons) to access that data. This is certainly true for your auto insurance carrier. Some of the things your carrier probably knows about you are your driving record, credit history, the type of car you drive, and other information they use in making decisions such as whether to give you coverage and how much they will charge you for that coverage.
Credit information is one variable insurance companies use in evaluating your risk score. You have a far better chance of getting affordable coverage and policies if you have a good credit score, a solid history of paying your bills on time, no bankruptcies on your record, and no bad debt. Insurance companies have been able to statistically measure a direct relationship between your credit rating and the chances of your filing a claim. So a better credit rating will help you get a cheaper premium. Conversely, an applicant who has a poor credit history – being late on bill payments or having bills referred to collections agencies – will be considered a higher risk for making a claim or not paying their policy premium.
A good rule of thumb is that your credit score will probably correlate to your insurance risk score. It’s not always true as driving records also contribute significantly to your risk profile, but for many people, it’s a good measure to evaluate your risk score. Note that you won’t be able to get your insurance risk score from a company but you can get a very good idea on where you stand simply by looking at your own credit rating and your driving record.
You may think that using credit scores to help evaluate risk isn’t really fair as it appears to have no real bearing on your driving record. However, many industry experts believe that credit scoring helps make auto insurance rates more accurate, fair and objective. The use of credit scoring varies from state to state and from company to company; but based on statistics, the current industry believes that drivers with good credit records have fewer accidents and file fewer claims than drivers who don’t.
There are many Internet services that allow consumers to check their credit rating, often for free. These organizations often offer suggestions on how a person can improve their credit scores. In addition, it’s a good idea to check your credit scores once a year even if you believe you have good credit because sometimes errors creep into your record. If you have a legitimate dispute regarding your credit score, there are steps you can take to rectify a mistake.
Your driving record is also invaluable to an insurance company in the assessment of risk. So keeping a clean driving record helps keep your rates low. Due to driving experience being so important as a predictor of insurance risk, insurance companies do their best to gain as much information as they can about a particular driver’s record. This includes accessing state motor vehicle records and gathering data about a driver’s record from other sources as well.
One thing that is important to note: You should never leave information about driving citations or other driving-related convictions off of your application for coverage. Doing so could create legal issues for you in the future. In addition, misrepresenting your driving record by leaving off moving violations or DUI convictions could give your insurance company grounds to cancel your policy.
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