How Does Bad Credit Affect The Cost Of Car Insurance?

Does My Credit Score Affect My Car Coverage Rate?

Yes, in most provinces, a driver’s credit score can impact his car coverage rates. This is due to the fact that there is no law to restrict the usage of credit scores for calculating car coverage rates. You need to know that a few provinces such as Labrador, Newfoundland, and Ontario have a ban in place for this practice. But the law is prone to change with the passing of time. So, if your car coverage rate will be affected due to your credit score would depend on where you stay. To keep coverage rates low, it is better to have good credit.

Is there a problem with the use of credit scores to assess a driver’s car coverage risk?

Most insurers may use a driver’s credit score to work out car coverage rates. It helps them to know the chances of a driver likely to file a claim. From studies, it is known that drivers that have bad credit are most likely to file claims. And insurers make use of these findings to assess coverage risks for cars. So, if you have a low credit score then the car coverage rates will be high.

The problem that insurers face is that they don’t rely on credit scores. This is because credit scores can differ from agency to agency.

Do bad credit scores really show that car coverage risks are high?

It is known from past studies that drivers that have bad credit car insurance are more likely to meet accidents. Hence, most insurers fear that such drivers will file claims. To say it the other way round, drivers with good credit are more in control while driving cars on the road. So, they are deemed to be much safer drivers and less likely to meet with accidents. It is just that such people, who manage their finances in a good way, are also safe drivers. Hence, people with poor credit scores are treated as high-risk drivers.

How do I check my credit score?

To check your credit score, you can get a free annual copy of your credit report. You need to know that there are two main credit bureaus in Canada – One is Equifax and the other is TransUnion. Both of them may provide a copy of your annual credit report that is free of cost. To get a free copy of your credit report, you just need to send them a letter with 2 copies of your photo IDs.

You can also get your credit report online. But you may have to pay a fee. Just visit the websites of both the bureaus.