topic Re: Credit Rating impacts on Car Insurance Rates in Community Chat

Credit Rating impacts on Car Insurance Rates

Bird mama — Wed, 19 Aug 2015 00:21:34 GMT

This probably has been going on for some time now, but I just noticed in one of the stuffers from my auto insurance company that they solicited credit report information from an agency.

Help me understand what the heck my credit rating has to do with my overall car insurance. I understand that the insurance company wants to be paid on time (and they are). I understand that the insurance company wants to know if I am a menace to society and have any tickets/points on my driving record.

I'm in health insurance which is different from auto - why do you think my credit rating has anything to do with determining risk for auto insurance?.

Re: Credit Rating impacts on Car Insurance Rates

MyGirlsMom — Wed, 19 Aug 2015 00:22:49 GMT

It impacts your Home Owners Insurance as well.

Re: Credit Rating impacts on Car Insurance Rates

Moonchilde — Wed, 19 Aug 2015 00:26:13 GMT

A measure of general reliability in all things. They (some companies) also check the credit reports of job applicants. It's (theoretically, for them) a meadure of whether you are "likely" to be a careful driver, or not. That's the rationale. It has a point in a general (VERY general) way.

Re: Credit Rating impacts on Car Insurance Rates

Mominohio — Wed, 19 Aug 2015 00:26:43 GMT

In a nutshell, they do it because they can. No one has outlawed it, and they can make more money off of someone, although usually those with bad credit don't have much money. Most states require car insurance, and they are looking for ways to make more money. And there might be some numbers that support those with bad credit file more claims, but that is just a guess on my part.

My mom has a philosophy that insurance companies are just the mafia without the guns. I tend to agree. They are making billions and billions of dollars off the backs of people who have to have their products.

Re: Credit Rating impacts on Car Insurance Rates

Bird mama — Wed, 19 Aug 2015 00:39:40 GMT

I have an excellent credit rating and my no fault on my old car dropped

$40 from the last 6 month period to the upcoming period. That said, even though my credit rating benefitted this experience, I still think it's stupid.

@Mominohio

Your Ma and I need to have a cup of coffee - I agree with her.

Re: Credit Rating impacts on Car Insurance Rates

Lucky Charm — Wed, 19 Aug 2015 00:49:38 GMT

They have been doing this for at least 20 years now.

Re: Credit Rating impacts on Car Insurance Rates

Carolm — Wed, 19 Aug 2015 00:50:29 GMT

There is an article on this subject in this month's Consumer Report magazine. It was in depth and an eye opener, for anyone looking for more information.

Re: Credit Rating impacts on Car Insurance Rates

millieshops — Wed, 19 Aug 2015 01:11:54 GMT

Maybe people with high credit ratings have more to lose than those with low ratings, so they drive more carefully, park their cars in safer neighborhoods, etc.????

I know our credit ratings are used for many reasons -- here and there some of those reasons make sense, but those who use them should have to show the correlation ---assuming one exists.

Re: Credit Rating impacts on Car Insurance Rates

Mominohio — Wed, 19 Aug 2015 01:47:12 GMT

@Bird mama wrote:
I have an excellent credit rating and my no fault on my old car dropped
$40 from the last 6 month period to the upcoming period. That said, even though my credit rating benefitted this experience, I still think it's stupid.

@Mominohio
Your Ma and I need to have a cup of coffee - I agree with her.

@Bird mama I'm sure she'd enjoy that!

Re: Credit Rating impacts on Car Insurance Rates

Kachina624 — Wed, 19 Aug 2015 02:06:10 GMT

I'm sure they view having a good credit rating as a sign of taking responsibility in paying bills which could carry over to driving habits.

Re: Credit Rating impacts on Car Insurance Rates

Bird mama — Wed, 19 Aug 2015 02:10:44 GMT

I still think mominohio's Ma is onto something. They need to cap our insurance payouts in my state, it's out of control.

Re: Credit Rating impacts on Car Insurance Rates

Snowpuppy — Wed, 19 Aug 2015 02:11:49 GMT

Your state law allows the credit report to impact rates. Here in MI they use scores, too. You can ask them to pull your score more often if it's improving and you think your rates will go down.

The thinking is that if you're deep in debt you may be a worse risk. But as someone said they do it because they can.

There's also a risk score they use that's only available to insurers. It tells them how many claims you've had and what amount was paid out.

Re: Credit Rating impacts on Car Insurance Rates

WenGirl42 — Wed, 19 Aug 2015 02:13:49 GMT

It's not about being "a sign" of anything. It's segmentation, pure and simple. Actuarial data shows that people with worse credit end up costing the insurance company more in losses over time. So their rates are higher.

Re: Credit Rating impacts on Car Insurance Rates

Puzzle Piece — Wed, 19 Aug 2015 05:09:20 GMT

Whaaaaaaat !!!!!

Re: Credit Rating impacts on Car Insurance Rates

guatmum — Wed, 19 Aug 2015 12:35:06 GMT

They do it because they CAN. They make LOTS of generalizations that are, in fact, incorrect in many if not most cases. Just an FYI, insurance companies charge higher rates to people who are SINGLE also. So if you are single with a lower credit rating, you're being raked! The logic behind it baffles me. I am single. I have to be careful with my money and possessions because I have no "safety net," no one to take over or help me if I am in a bad situation. Therefore, I am EXTREMELY careful with things, especially my car. If I had a low credit score and would find it hard to get a loan, I'd be doubly careful to maintain and safeguard my car. Therefore, I wouldn't cost any insurance company more than the average married.

Btw, I worked in insurance as an underwriter for a while. The data and actuarial tables they use are often outdated and are chosen to suit their purposes.

Re: Credit Rating impacts on Car Insurance Rates

AngusandBuddhasMom — Wed, 19 Aug 2015 13:33:09 GMT

l I work in commercial reinsurance which obviously is separate then what you deal with. But still is dealing with the solvency of corporations and their ratings. I have no problem with the rating as I have good credit and so my insurance rate reflects that. Considering I live in a state with a disproportionately high rate of motor vehicle accidents by uninsured or under insured drivers I am glad for the credit rating.

All companies are rated by solid credit. Not just the insurance companies that you purchase your insurance from which need to verify their clients are credit worthy. So that they will be a better risk in the long run. The reason being is to see what the risk is incase of something catastrophic happening. Everybody moans and complains but when they need it they expect it paid asap.

This is not new this system has been around a long time. It is how we do commerce and trade. Your rating is just apart of the day to day business and economic growth or recovery of everyday business. The stock market is dependent on this as is the continuation and movement of trade.

Re: Credit Rating impacts on Car Insurance Rates

AngusandBuddhasMom — Wed, 19 Aug 2015 13:35:57 GMT

@guatmum wrote:
They do it because they CAN. They make LOTS of generalizations that are, in fact, incorrect in many if not most cases. Just an FYI, insurance companies charge higher rates to people who are SINGLE also. So if you are single with a lower credit rating, you're being raked! The logic behind it baffles me. I am single. I have to be careful with my money and possessions because I have no "safety net," no one to take over or help me if I am in a bad situation. Therefore, I am EXTREMELY careful with things, especially my car. If I had a low credit score and would find it hard to get a loan, I'd be doubly careful to maintain and safeguard my car. Therefore, I wouldn't cost any insurance company more than the average married.

Btw, I worked in insurance as an underwriter for a while. The data and actuarial tables they use are often outdated and are chosen to suit their purposes.

They are not cast in stone and it is up to the consumer to question their rate when getting a policy or renewing. If you do not speak up and ask why then they will not upgrade or reconfigure your policy.

Re: Credit Rating impacts on Car Insurance Rates

missy1 — Wed, 19 Aug 2015 14:12:26 GMT

IMO they don't go hand in hand. You could have a high credit score when starting the policy, and then go to a low rating. (due to medical bills etc.) My insurance never checked my scores, neither have my employers. Most people would pay their car insurance, before a credit card/etc. Poor credit score, doesn't mean more accidents.

Re: Credit Rating impacts on Car Insurance Rates

AngusandBuddhasMom — Wed, 19 Aug 2015 14:15:51 GMT

@missy1 wrote:
IMO they don't go hand in hand. You could have a high credit score when starting the policy, and then go to a low rating. (due to medical bills etc.) My insurance never checked my scores, neither have my employers. Most people would pay their car insurance, before a credit card/etc. Poor credit score, doesn't mean more accidents.

Not always but it does give them an idea of how you pay your bills.

Re: Credit Rating impacts on Car Insurance Rates

WenGirl42 — Wed, 19 Aug 2015 14:18:07 GMT

@AngusandBuddhasMom wrote:
@missy1 wrote:
IMO they don't go hand in hand. You could have a high credit score when starting the policy, and then go to a low rating. (due to medical bills etc.) My insurance never checked my scores, neither have my employers. Most people would pay their car insurance, before a credit card/etc. Poor credit score, doesn't mean more accidents.
Not always but it does give them an idea of how you pay your bills.

Actually, across the population (which is how statistics are determined), yes poor credit score DOES mean more accidents.