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How Your Credit History May Affect Your Auto Insurance Rates

Auto insurance companies often consider your credit report when they are determining the proper rate to charge you for your auto insurance.  If you are shopping around for auto insurance, be aware that potential insurers may be looking at your credit report.  There is a statistical correlation between consumers credit history and possible auto insurance claims.  Insurers assume that customers with better credit records are also more likely to be good risks for auto insurance policies.
Not all companies use credit history as their primary determination for your rate, so if you have a poor or nonexistent credit score, shop around for one that uses traditional methods -age, driving record, type of vehicle, etc. to determine your auto insurance rate.  Different methods vary from company to company, so if you are in doubt about how a potential insurer makes its decision, be sure to ask.
According to The Federal Fair Credit Reporting Act, auto insurance companies are well within their rights to use your credit report in this manner.  Found at http://www.ftc.gov/os/statutes/fcra.htm.  The act states that companies can use this information for Reasonable procedures”.  It is the purpose of this Act to require that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit, personnel, insurance, and other information in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information in accordance with the requirements of this title.
In order to be sure that your insurer finds the correct information on you, be sure to provide them with the necessary information promptly.  Most likely, they will need your full legal name, current address, social security number, and date of birth.  This will enable them to get your insurance credit score, which helps insurance companies assess the information in your credit report quickly to determine if you are a good candidate for auto insurance.
This credit score may vary from one insurance company to the next, as each may use a different method to calculate your insurance risk and premium.  The insurance score is an all-encompassing method that takes into account many risk factors, including credit.  Since each company uses slightly different methods, it is difficult to even give a range for what a good insurance credit score might be.  In fact, the program the insurance company uses may not even tell them the specific score you receive, only if you are a qualifying candidate or not, and what tier your rates fall into.
If you feel that there are errors or incorrect information on your credit report that is affecting your insurance credit score, you should contact the credit bureau issuing the report.  Unfortunately, there is nothing your insurance company can do to help you with this problem until it is resolved by the credit bureau.  Once you have corrected it, you can resubmit updated information to your insurance company, and have them reassess your rate.
The key concept is that credit scores are a growing element in many business decisions.  Fix your credit score before it becomes too late and the costs of having a low credit score become very real costs.  The sooner you start on the path of credit score help the faster the credit score will improve and the simpler transactions will become that are dependent on this number.

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