Online auto insurance and credit scoring

Insurance is always supposed to be about who you are and how good a driver you are. That why insurers are so interested in your background, how many miles a year you drive and where you live. So why should they care if you have a good credit score? This has nothing obvious to do with how well you drive. Yet almost without exception, all insurance companies will look at your credit history before deciding whether to accept you as a policyholder. It starts with the more general question of whether you’re likely to be able to keep up the installment payments. There are administrative costs if you start a policy and then the insurer has to keep chasing you to make each payment when due. Indeed, the majority of insurers will cancel the policy if your payment record is too bad. So if you have a poor track record in meeting other regular payments, you may find your application refused or renewal declined.

Once we get past this legitimate use of your credit history, we’re then into murky waters. Suppose you’re short of money, do you spend as much on the maintenance and repair of your vehicle? If not, you may drive on bald tires or with worn brake pads, and have more accidents. Should you be really desperate for money, you might be more likely to report your vehicle stolen to get some cash. Most states have laws to control the way in which this information can or cannot be used.

For example, Wisconsin’s laws depend on the idea of unfair discrimination. If you suspect an insurer is guilty of discrimination, you’re entitled to ask for a copy of all the credit reports the insurer relied on when making the decision. These must be supplied to you without any charge. If you find the information is wrong, you can have it corrected and ask the insurer to review the decision. This is all part of the federal rights represented by the Fair Credit Reporting Act and the Fair and Accurate Transactions Act. These entitle you to one free copy of your credit history a year from each of the major reporting bureaus including Equifax, Experian and TransUnion. If you find any inaccuracies, you’re entitled to have corrections made. Remember, this is not your credit score. It’s the information used by lenders and others to create a score for their own purposes. The way insurers use this information does not create a standard score. Once you’re sure all the information is correct, you’re entitled to ask your insurer to review the premium rates. If the changes are significant, the insurer is likely to reduce the rates. The most honorable will reduce the rates from the time the error was made (assuming you’ve had the policy that long).

All auto insurance quotes are estimates of the risk you will have an accident and claim. The more you can do to convince the insurer you’re a safe driver, the lower your rates will be. If this means showing more financial responsibility by keeping all your payments up-to-date and avoiding defaults, then that self-discipline is going to benefit you in other parts of your life. It’s worth doing anyway. Let online auto insurance be the incentive to prove you’re trustworthy.

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