Costly Connections: Car Insurance Rates and Your Credit Score


You know you have a credit report, and score, but you don’t really think about it too much when buying insurance for your Used Dodge Challenger in Chicago. You should. Why? Because your credit can dramatically impact your car insurance rates. How can that be? Well, insurers have a good reason for using your credit score to determine how good of a driver you might be.

Why Insurers Check Credit Scores

If you go to an insurance broker, odds are you’re going to have your credit pulled when you apply for insurance. Insurance companies are in the business of managing risk. One of the risks that insurers manage is your risk of being in a car accident.

Believe it or not, credit matters when you’re on the road. Insurers have positively correlated good credit with good driving habits. It might be that people with good credit tend to be more responsible. It might be that they are more apt to pay their bills on time so they’re more apt to pay attention to what’s on the road, obey road signs, and drive more responsibly.

Of course, not all people with good credit are good drivers. Likewise, not all people with bad credit are bad drivers, but there tends to be a positive correlation and, for better or worse, insurers use that when pricing in premiums.

How To Check Your Report and Score

Checking your credit score isn’t all that difficult. First, you need to contact the three major credit bureaus and ask for your credit report and score. Experian, Equifax, and TransUnion all have websites and easy-to-find contact information. Just write them a letter or email them. Easy as pie.

What to Do If You’re Being Rated for Your Score

If you’ve just received a letter from your insurance company, stating that you’re being rated because of your credit report or score, it’s time to do some digging. If you haven’t already obtained a copy of your credit report and score from the three major bureaus, do it now.

Then, comb over those reports. You’re looking for anything that looks suspicious. Any remarks that seem erroneous or possibly not quite what you thought they should be, you can dispute. The general rule is that, when you dispute an item, it must be false.

You can’t dispute derogatory remarks in your credit file merely because you don’t like them. OK, so, assuming you’ve found something wrong, it’s time to right to the credit bureau. Here’s where things get tricky. If this remark has been on there for a while, it might be difficult to remove.

What you’re going to have to ask for is proof from the original creditor that the remark is valid. It will help your case immensely if you have proof that the derogatory remark is invalid. So, for example, let’s say you have an account marked “settled” when it should be marked “paid in full.”

If you have a receipt, a bank statement, or some other proof that shows you paid this debt in full, and on time, the credit bureaus will basically be forced to change the entry to reflect what actually happened. Then, you simply go back to the insurer and have them re-rate you.

Jack Logan

The author Jack Logan