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Do All Auto Insurance Companies Consider Credit History?

By December 30, 2021April 11th, 2024No Comments

Insurance companies consider a lot of things when calculating your car insurance premiums. Each factor is used to evaluate how likely you are to file an insurance claim. To save money, insurance companies don’t want you to file an insurance claim, so they charge drivers more who are likelier to get in a wreck or have a need to file a claim.

Credit history is typically a main factor in your car insurance premiums. Unfortunately, most car insurance companies do consider your credit history. Those that don’t typically charge more for premiums in order to compensate for the higher risk.

What is a High-Risk Driver? 

A high-risk driver is a driver that insurance companies see as most likely to file an insurance claim. You may be considered a high-risk driver if you:

  • Have poor credit 

  • Have a poor driving record with multiple violations 

  • Have an SR-22 

  • Are younger than 18 years of age 

  • Drive a sports car/expensive vehicle 

Purchasing car insurance when you’re considered a high-risk driver isn’t impossible, but it is difficult and often expensive. Some insurance agencies don’t insure particularly high-risk drivers, and the ones that do charge a lot for premiums to balance out the risk. One at-fault accident can typically raise your rates about 30% while violations such as DUIs can raise it by 80% or higher. This can be over $1,000 more a year. Man driving car

How Far Back to Insurance Companies Look? 

When it comes to previous claims and your driving record, insurance agencies typically look two or three years back. On credit scores, they could look as far back as seven years, though the most important score is your current one at the time you purchase a policy.

Does Paying Car Insurance Help You Build Credit? 

Unfortunately, you can’t build credit by paying your car insurance bills. While car insurance doesn’t help you build credit, it also doesn’t hurt your credit. Your credit score shouldn’t go down if you miss a payment.

To build your credit, you must pay bills on credit cards, student loans, car loans, lines of credit and mortgage loans.

Other Effects on Your Car Insurance Rates 

Although credit is a big factor in car insurance rates, it’s not the only factor. Even if you have bad credit, you may be able to adjust the other factors in order to lower your insurance premiums. Important factors include:

  • Driving record 

  • Location 

  • Value of the vehicle 

  • Age and gender 

When you reach the age of 25, you should see a substantial drop in your insurance rates. Men also tend to pay more for car insurance as they’re statistically more likely to participate in aggressive driving behaviors.

Certain locations charge more to insure vehicles as well, especially areas with a high rate of car wrecks of locations close to major highways. The cost of living in the area can also affect your car insurance rates, as wrecks in expensive areas may be more costly than in areas with a low cost of living.

Besides your credit, perhaps the biggest influence on your car insurance rates is your driving record. As discussed before, certain violations can raise your insurance rate. Most violations last on your record for around three years depending on your location. Other violations, however, can last up to 10 years. While you can’t expunge violations on your record at will, you can prevent them by driving defensively and taking driving courses.

It also helps to look for discounts such as Good Driver discounts, Mature Driver discounts, Good Student discounts, bundling policies with home and auto, and more.