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Credit One of Many Factors Insurance Companies Use to Evaluate Risk, Calculate Premiums
SAN FRANCISCO, Oct. 24, 2013 /PRNewswire/ -- Drivers with poor credit-based insurance scores pay almost twice as much for car insurance (91% more) than drivers with excellent scores, according to a new insuranceQuotes.com report. Drivers with median credit pay 24% more than those with excellent credit.
Credit is one of many factors that insurance companies use to evaluate risk and calculate premiums. Other examples include driving records, age, gender and past claims. Rather than FICO credit scores (which are commonly used by mortgage lenders, among others), insurance companies generally use a proprietary scoring model.
Insurance scores, like credit scores, are calculated using information in credit reports (including late payments, credit card balances and credit inquiries). However, they're used to predict the likelihood of a future insurance loss, instead of a consumer's creditworthiness.
"Considering all of the factors that go into car insurance rates, credit is actually one of the easiest to control," according to Laura Adams, senior insurance analyst, insuranceQuotes.com. "Responsible habits, such as paying your bills on time and minimizing debt, pay off in many ways, including paying less for car insurance. Consumers should monitor their credit reports at least once per year, get errors corrected and notify property insurers about positive changes. This could lead to hundreds of dollars in annual savings."
Three states (California, Massachusetts and Hawaii) prohibit the use of insurance scores in setting car insurance rates.
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insuranceQuotes.com also released a free resource that educates consumers regarding credit-based insurance scores and explains how consumers can improve their scores and ultimately lower their insurance costs. The document answers key questions such as:
The free resource is available here:
insuranceQuotes.com commissioned Quadrant Information Services to examine how credit affects car insurance premiums. Quadrant calculated rates using data from six large carriers in all 50 states. Assumptions included policy limits of $100,000 for injury liability for one person, $300,000 for all injuries and a $500 deductible on collision and comprehensive coverage.
insuranceQuotes.com provides consumers with a free, easy way to shop for and compare insurance quotes online, and delivers information about auto, home, health and life insurance and other types of insurance.
insuranceQuotes.com is part of Bankrate Insurance. Other Bankrate Insurance companies include NetQuote.com and InsureMe.com.
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