To ensure the safety and security of your car, it is imperative to have a comprehensive car insurance policy. Having your car insured with a reliable insurer will protect you from unexpected out of pocket expenses in the event of an accident or mishap involving your car.
However, while buying a car insurance policy one of the vital factors that come into play is your credit score. The car insurance premium rate largely depends on the credit insurance score of the car owner. The higher your credit score is the lower the car insurance rate you will be offered. Thus, if you have a great credit score, you can go for a higher sum insured amount for better security of your car without stressing your pocket.
Credit score and its effect on car insurance rates
What is a credit score?
Credit score is the 3 digit number assigned to a person by the credit reference agencies on the basis of his/her past financial behaviour. The car insurers in the UK usually don’t consider the numerical credit score assigned to a consumer by one specific credit agency like Experian or Equifax. Instead of depending on one scoring system, they prefer to calculate the consumer’s credit-based insurance score on their own using his/her credit report information along with other information that they hold.
Car insurance companies in the UK consider the credit-based insurance score of a consumer to be extremely useful in predicting the risk of loss. Since the credit score reflects the past credit and financial behaviour of a consumer, this acts as a yardstick for the insurers to predict the number of claims that he/she is likely to file in future and the total amount that the claims will cost. As such, they use this score to match the price of a car insurance policy with the potential risk posed by the customer.
How does it affect your Car Insurance premium rates?
As the credit score represents the worthiness and repayment ability of the car owner it plays a pivotal role in determining whether he/she qualifies for the best car insurance rate or not. Car insurers offer the best insurance rates and deals to car owners who have the best credit history. If your credit score is below what the insurer is looking for, you will have to pay higher premium rates against your car insurance policy.
Insurance companies are very strict with their criteria and rely only on car owners who they consider to be the most eligible ones. When you have a high credit score, it prompts the insurers to have faith in you that you will pay the premiums on time without any default. On the contrary, having a poor credit score implies that you have poor financial management skills and are not likely to pay the premium on time.
Well, if you already have a car or planning to buy one, it is crucial to improve your financial behaviour and boost the credit score in advance so that you can get the best car insurance rate offers from the insurer. Remember, as a lower-risk customer you are, you will have to pay a lower amount of premiums compared to the higher-risk ones. To know more about the insurance rates contact Compare Market Insurance experts.