Most drivers know that insurance providers take a variety of factors into account when determining the cost of car insurance. They consist of points like your driving record, where you live, the type of vehicle you own, and how many kilometers you travel each year.
But did you know that insurance providers can also check your credit rating when determining your auto insurance rates? Depending on where you live in Canada, some insurance providers are enabled to check your credit rating and may be able to affect the premium you pay.
Why would an auto insurance provider want to see your credit rating?
It’s not uncommon for insurance providers to check a customer’s credit rating when determining the cost for home insurance coverage, but that’s not the case for auto insurance costs in all provinces.
That might seem a little strange. Also, auto coverage is not a credit rating card. In provinces where insurance providers are allowed to use credit ratings when pricing a car, they do so because this may be a sign of the level of risk the driver is at. Thus, the higher your credit rating, the less likely you are to remain in an accident and file an insurance claim, or two drafts. If you really have a good credit rating, the lower your plan premium will be. A bad credit rating can also suggest that you will miss out on making regular monthly insurance payments.
Among the problems with allowing insurance providers to check a driver’s credit rating to evaluate risk, however, is that there is no uniformity or standard among credit score companies when measuring an individual’s creditworthiness.
However, insurance providers will appear on various aspects of your credit background, including:
- Your resettlement background and how much late resettlement or delinquency is in your records
- How many types of credit accounts do you have consisting of credit cards and loans
- How much credit you use versus your available credit limit
- How much overall financial obligation do you carry guide
The Canadian Bureau of Insurance (IBC) has a voluntary code of conduct that outlines how its participants use customer credit information. Most property and auto insurance providers in the country follow its code, which motivates insurers to obtain a record of their customers’ credit ratings, as well as prohibits service companies from rejecting or canceling driver-centered plans entirely on the bad. credit score.
How to check your credit rating
Before asking for any kind of insurance coverage, it may be helpful to check your credit rating so you know how you rank. The two major credit score companies in Canada are Equifax and TransUnion. Each charges an electronic access fee for your score, but you can also request a free paper copy from them annually.
Bad insurance credit rating? Here’s how to reduce your premium
Suppose you live in a district where auto insurance providers check credit ratings, and you know your credit rating isn’t outstanding. If that’s the case, there may be a way you can lower your premium. For example:
- Maintain a tidy driving record. This is one component of the insurance company’s risk rating calculation that you can control. On your own defensively, avoid driving at high speeds and deviating, and try not to get into accidents to keep your costs down.
- Review your plans. Ask your broker or representative to review your plan with you and see if there are certain coverages you can do without. Also, ask what discounts might qualify you such as packing your home and car packages with the same provider.
- Increase your deductible. If you can increase your deductible, it can help lower your premium. Make sure you have the budget to pay for insurance deductions if needed.
- Shop your fare. Wherever you live, and what are your plans for revival, take a few minutes to look over the prices. This is the quickest and easiest way to find out what your options are.