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Understanding Credit Score and Car Insurance

Understanding Credit Score and Car Insurance
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Understanding Credit Score and Car Insurance

When it comes to car insurance premium rates, there are several factors that might affect the same. In addition to common factors like your driving history, demographic factors, and so more, your overall credit history might also matter significantly towards determining your motor car insurance rates. Your individual credit score is denoted by a specific number that is used to indicate the likelihood of you paying the debts. Your individual credit score is used for measuring your credit-worthiness –the chances that you will be paying back the credit card loan or debt.

Most of the insurance companies, thus, look forward to analyze the individual credit score of people before handing them any reliable four-wheeler insurance policy. In this article, we will help you understand how your credit score can affect your car insurance and how you should aim at improving the same.

Credit Score & Car Insurance Premiums

Usually, the insurance companies offer the base premium rates for different motor car insurance plans towards evaluating the insurance score for the given vehicle. The particular car insurance score usually takes into account the overall credit history of the policyholder towards predicting the likelihood of being involved in an accident or claiming the particular insurance for the car. Research claims that the credit score of an individual and the chances of getting involved in a car accident are usually inter-linked to each other.

As such, the government makes sure that the motor car insurance providers offer fewer preferable terms & benefits to those having no or poor credit scores. Therefore, most of the time, the companies aim at informing the respective policyholders to maintain a high credit score for enabling the ease of filing the car insurance claim

How Credit Score Can Lower Your Insurance Premium Rates?

The credit score tends to be inversely proportional to the overall premium rates for your car insurance online policy. If you tend to have a higher credit score, you will be asked a lesser premium rate by the particular insurance company. Here, you are eligible for applying for a wide range of special add-on covers that come with lower premium rates. Similarly, when you have a poor or no credit score, there are chances of you being charged higher premium rates for the four-wheeler insurance plans. A poor credit score also makes it difficult to file the proper insurance claim during the car accident or road mishap.

For analyzing your individual credit score history, most of the insurance companies make use of the following key factors:

  • Payment history of the individual including reasons for late payments or delinquencies
  • Length of the overall credit history
  • Types of credits incurred upon by an individual including credit cards, loans, and so more

While determining your individual credit score, personal factors like your age, gender, income, and others are never taken into consideration. A credit-based car insurance score helps in allowing the insurers towards quoting the most appropriate and effective premium rates out of the end customers. As such, if you wish to avail the benefits of lower premium rates and the ease of filing an insurance claim, you must aim at improving your overall credit score & history.

How to Improve Credit History?

Some of the major pointers that you can keep in mind while aiming towards improving your credit score are:

  • Pay all your bills on time
  • Keep balances on your credit cards low
  • Pay off debt as soon as possible

Ensure that you obtain all possible benefits of the car insurance policy through an improved credit score!

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