Credit scores and car insurance
POSTED: Wednesday, October 30, 2013 - 5:23pm
UPDATED: Friday, January 3, 2014 - 6:33pm
While you sweat out each traffic ticket or fender-bender, wondering what it will do to your car insurance premium. Maybe you should worry more about the overdue Mastercard bill.
As you might imagine, it began with a couple of mathematicians, of course, named Fair and Isaac, who developed a formula for measuring creditworthiness. FairIsaac became Fico and it now rules our lives.
We expect our credit score to be a factor in getting a loan or a credit card.
But auto insurance?
”They want to know that you’re going to be able to pay your premiums per month,” SAYS Angie Rushing of the Copeland Group Insurance.
“ In the past, maybe half would do it, half would not do it,” says Tom Sorrells of Tom Sorrells Insurance. “Now we’re starting to see some of the minor league players some of your little regional carriers saying, hey, we can do credit score, too.”
That’s right, two men drive up in the same model Ford Taurus, with equal driving records.
The one with the better credit score gets a better insurance rate.
“I’ll give you one worse than that,” says Sorrells. “The same Ford Tauruses pull up. The guy on the left has a DWI, has a wreck, 2 or 3 tickets, but has stellar credit. The guy on the right, same car, perfect driving record. But a few hits on the credit. He’s going to get a worse price than the guy with the bad driving record, but the good credit.”
So if you pay your premiums, and have a good driving record, why should a credit score even matter?
“The insurance companies just want to make sure they’re going to get paid,” Rushing says. “And the more toys like boats, RV’s, 4-wheelers, they want to know that you’re going to pay those payments per month.”
And this trend is less than 20 years old.
A cynic might think this is just a way for an insurance company to charge you more.
Says Sorrells, “It’s all about the money (laughs).”