The reason that companies today are checking out your credit history before offering you car insurance quotes is that there is some information that shows that those with negative credit histories may present a greater risk to the company. This means that companies feel that people who have better credit are less likely to end up making claims. Since you are perceived as a higher risk if your credit is bad, you'll end up paying for it.
Of course, you should remember that your credit history is not the only thing that is taken into consider when companies are determining your premiums and offering you car insurance quotes. They also take a look at your gender, age, the vehicle you drive, your location, driving history and more. All of these factors are taken into consideration to determine what they will charge you. So, while a bad credit score can be a problem, it's not the only thing they are looking at.
You may be wondering if companies are allowed to check out your credit information. Yes, they are. They are allowed to do this under the Federal Fair Credit Reporting Act, since it is considered to be a "reasonable procedure." In some cases, companies may take a look at your credit report. However, more often they will take a look at your "insurance credit score," which is a score they come up with to figure out your overall risk to their company.
When companies take a look at your credit, there are a variety of factors that they keep in mind. Some of the things that they may look at include the length of your credit history, public records, your payment history, the type of credit you have, unused credit, and the amount of open credit you have available.
Since your credit history and score do come under scrutiny, it may be a good idea to check out your score yourself. In fact, it's a good idea to check your report each year. Sometimes negative things may end up on the report that shouldn't be there. If there are problems with your report, you can dispute it with the credit reporting agency and get it removed.
Yes, your credit history can end up sabotaging your chance at low rates. However, there are things that you can do to bring up that credit score and make your credit look better. Before you get your next car insurance quotes, do your best to make your score improve and it can help you to save a bit more money on your policy this time.
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