How Does Your Credit Score Affect Car Insurance Rate?

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Credit Score Affect Car Insurance Rate

Whether you are applying for a loan, buying an automobile insurance policy, mortgage loan or any such thing, a good credit history and a healthy credit score is the biggest demand of all financial institutions these days. If we talk about auto insurance purposes specifically, it plays a vital role. For every individual who owns or operates any vehicle, buying an insurance policy is must in Kenya. Is it that easy to purchase a car insurance in Kenya?

Well, most of the insurance companies in Kenya gauges specific parameters based on which they sell you the policy and Credit Score is one of them. Other factors like your age, gender, driving experience, driving record, location, make and model of vehicle also pay important roles in determining car insurance premiums. But your credit history helps the insurance companies your past credit record and your future claim risks based on which they either will reward you with low car insurance premium rates or will increase the rates.

For every driver, maintaining a good credit history is as important as a driving record. In Kenya, any person who owns a car has to buy a third-party policy as this is the minimal cover required as per traffic laws of Kenya. But at what rates will you be purchasing any policy is important. Different parameters are analyzed to calculate car insurance quotes for your vehicle. Here, in this blog, we will discuss about the importance of credit score in detail.

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What is A Good Credit Score?

A credit score is a numeric value that ranges between 100 and 900 and depending upon a number of factors calculated by CRB (Credit Reference Bureaus  of Kenya). Your credit score describes how strong you financially are to repay your debts. Financial institutes, banks, insurance companies and other such firms share the credit history of their customers with credit bureau where the customers based on cleanliness of their credit history list them for whitelist and blacklist.

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The credit score 900 is an excellent,  more than 700 is considered as a good credit score and less than 500 as a poor credit. A person with poor credit is considered to be more likely unable to pay insurance premiums timely. And customers who will be paying all premium amounts timely are less risky buyers. You know while applying for car insurance quotes, here on NEXT, we provide various parameters that gradually decrease your car premium rates. One of those basic parameters is Your Credit History. We offer various discounts, reward points based on which your premium rates slow down.

What does your credit score have to do with motor insurance?

Your insurance providers will look for your credit score to help predict your risk to file a claim and thus determining rates. Those with a bad credit are more likely to make more claims Thus your company keeps an eye on credit score to know if you can pay all your debts in a timely manner.

A Higher credit score will result you in paying a lower amount of premium, and conversely, a lower credit score will likely result in you being charged a higher amount for coverage.

Car Insurance Companies in Kenya calculate credit score based on factors like length of credit history, payment of bills, credit utilization, type of credits in use etc. A driver with good credit score is less likely assumed to file for claims and thus enjoys comparatively low insurance rates.  Whereas a driver with a poor credit score will have to pay higher premium rates. Poor Credit may cost you even double the original car insurance premiums. Therefore, it is better to keep your credit history healthy.

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How do your Credit Score affects your car insurance premium rates?

Your Credit History reflects your credit worthiness – likeliness to file for claims. Your credit score matters a great deal when it comes to the car insurance premium that you will be charged for the insurance coverage you are planning to buy. A small premium difference may not seem large, over time, the difference in amount can really add up. In Insurance Companies of Kenya, on a scale of 100-900, if a person fails to clear average credit standards i.e. 500, has to pay higher premium rates whereas a person gaining scores more than 700 are rewarded with low premium rates. A healthy credit score always allows you to save money on insurance. Generally, a score higher than 850 is considered excellent, between 750-850 is very good, 650 – 750 good, 550-650 fair, less than 500 poor. Most credit scores fall between 600 – 750.

For most of the insurance companies, they do not disclose what your credit score is. Customers are obscure about the impact of this crucial factor on what they are going to pay. Thus it becomes duty of a customer to be aware of all the parameters that may raise or drop your rates and to what extent these factors impact. While purchasing NEXT, we let you know how our services will gradually benefit you by decreasing your motor insurance premium rates.

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How can I increase my Credit Score?

For purchasing a car insurance policy, the amount to be paid is much smaller as compared to other insurance categories.But if you have a bad credit score, it is very easy for CRB

to restrict your purchase or qualify you with higher premium rates. The impact of bad credit thus, will significantly hike your policy price. In other words, you will pay thousands more for the same policy which your friend with a good credit score has paid comparatively for a very less amount. Almost all insurance companies in Kenya now factor your credit score when calculating your premium payments, so good credit will save you money on this part as well. You can practice a couple of things to maintain a healthy Credit Score.

Take best care of your credit score by paying all your bills in a timely manner.

If you have already purchased an insurance policy and you posses a low credit score, try not to file any claims. Drive safely. Follow the traffic rules. In this way, you can raise your credit score.

Another case is when you do not have any policy and planning to buy one, here you can take the next important step. Shop around for best car insurance quotes online. You can visit our website and compare car quotes by different insurance firms to get to your best decision.

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