The practice is common in the United States but very few people know that a poor credit rating can often mean that they will pay twice what a person with good credit pays for auto insurance. Most insurance companies use credit scores or similar tools called insurance scores to help them determine how much to charge a potential customer.
In 2005 the Government Accountability Office conducted a survey and found that 64% of the people surveyed did not know that their credit history could significantly raise their premiums. In response to consumer complaints bills have been introduced in 21 states to limit credit information from being used when determining rates.
There are a few things consumers can and should do to keep from paying too much.
1) Ask your agent what tier you are in. Ask them if your credit is negatively affecting your rate. Your insurance agent is required to tell you this information if asked.
2) Check your credit score and get a copy of your credit report. Often there are
errors in the report that you can have removed which will improve your credit score.
3) Pay your cards on time and pay down your balances. Make sure you pay your utility bills on time as these can be reported as well.
4) Shop with different insurers. Some don’t use credit as a basis for determining rates.