Do Credit Scores Affect the Price of Insurance Rates?

Are Insurance Rates Affected by Credit Scores? in San Diego, CA

Most people understand when they purchase auto insurance, their rating variables are determined by certain factors. These factors usually include a person’s driving record, type of vehicle, where they live, their gender, and age. A research firm known as Conning & Agency determined that 92 percent of all insurance agencies also use credit information when making out new policies. When the Fair Credit Reporting Act passed in 1970, it allowed insurance agencies in what is known as “permissive purpose” to view credit information without a person’s consent.

How Premium Rates for Car Insurance are Set

Usually when car insurance agencies set their premium rates, they base it on the premise of getting at least six months to three years’ worth of premiums on a policy. Checking a person’s credit score is an indicator of how responsible they are. Poor credit scores make the risk of loss higher. Therefore, consumers with bad credit pay more on average for auto insurance in San Diego than those who have high scores. When an insurance agency raises the premium amount, it gives them an advantage to recover any costs quickly and increase their chances for a profit. People with high credit scores get a break on insurance rates because they have a higher percentage when it comes to making payments on their insurance premiums on time.

What does this mean for Drivers in San Diego?

Insurance agencies differ when it comes to scoring methods. A rate that one agency gives a person may not be the same as another. Credit scores vary among the three bureaus known as Equifax, Trans Union and Experian. It is very wise for people to get a copy of their credit report from each one of these agencies to check for inaccuracies that may raise their score. In addition, drivers in San Diego should visit different auto insurance agencies asking for quotes in order to find the right one that provides the coverage they need at an affordable price.

If you live in San Diego, automobile insurance is required by California state law and is something that can protect you not only physically, but financially. If you are concerned about the price of auto insurance, working with a agency like American Tri-Star Insurance may be the ideal option for you. For more information on our affordable auto insurance, click here or contact one of our auto insurance specialists at 619-272-2100 today.