Outside Factors that Affect Your Auto Insurance Premium

Posted in Auto Insurance

February 11th, 2009

Auto insurance premiums can be heavily affected by a number of factors, much of them having to do with your credit. In fact, you might be surprised by how much your credit really does matter, so be sure to check your credit report if you haven’t done so recently. So before you start looking for an insurance company to insure your vehicle, take a moment to explore what affects auto rates.

Past Payment History
When insurance companies compile information to make determinations on auto insurance premiums, they very often look at past payment history. This includes whether youve paid bills on time, how many delinquent accounts you have, and how many items you have in collections. If your past payment history doesnt look too favorable, a company may charge you a higher rate than other customers.

Adverse Public Records
If you have an account that has ended up in court then you have an adverse public record, which lands on the list of what affects auto rates. Most likely, when looking a past payment history, insurance companies will check to see if you have been sued for past-due accounts or have filed for bankruptcy. Anything on your public record that shows that you lack responsibility when paying bills can increase your auto insurance premiums by as much as 35%.

Number of Credit Lines Open
Some people are surprised to learn that their auto rates are impacted considerably by the number of credit lines they have open. A company looking to insure you might consider you to be a credit risk if you appear to run around opening credit accounts every chance you get. In fact, if you have balances on them and dont look to pay them, your auto insurance premiums can increase anywhere from 10 to 30%.

Length of Credit History
How long youve had your credit accounts can have an affect on your rate as well. If youve kept an account in good standing for many years, you are viewed as a lower-risk customer than someone with numerous short-lived accounts.

Some other factors that affect auto premiums include the number of inquiries made that show up on your credit report, the types of credit currently in use (retailers, credit cards, banks), and even credit youre not using. By making improvements to your credit report, you can save up to 35%, so keep this in mind before contacting a company to insure your vehicle.