Auto Liability Insurance

The relationship between your credit standing and your potential risk for auto liability insurance was developed after studies were made of millions of policyholders. The studies showed that the average person with poor credit filed more and bigger claims than the average person with good credit. This means that the people with the best credit tend to get the best rates.

When you apply for auto liability insurance, your credit is usually checked with a credit score. The score is a single number that provides an overall credit rating. There is no single formula used, but the scores tend to analyze the same items from your credit report. Such things as the number of accounts you have and how long you've had them, your bill-paying history, your total debt and whether you had any serious financial problems like a bankruptcy.

It's estimated that over 90% of all auto insurance companies use your credit rating to help set rates and in some cases to decide if they'll offer you insurance at all. And while it's likely that your credit is a factor in what you pay for auto liability insurance, you can't really be sure unless you ask. And should your credit be causing a problem, then you should also ask about what would be necessary to correct it.