Insurance Rates How Credit Cards Affect Them

How do credit cards affect your insurance rates? The idea sounds absolutely preposterous; doesn’t it? Even the thought that having too much credit card debt, or possibly paying your credit card bill late, or even becoming delinquent on your credit card bill, could affect your insurance rate is just too far fetched; right? Wrong!

What many consumers don’realize is that in numerous states, insurance companies have been allowed to examine your credit. Laws have been passed that allow insurance companies to check your credit to determine your insurance premium rates, or even deny coverage based upon your credit rating.


Supposedly, the argument by insurance companies has been, that if a consumer pays their bills late, or is delinquent on their bills, or is irresponsible in accumulating too much debt, then the consumer is obviously irresponsible in all aspects of life. This would theoretically include, bad driving and being delinquent on insurance payments. This in turn; as they argue; causes the insured to become a high-risk driver.

What’s most fascinating thing about these laws, is that in many states, they require consumers to purchase a minimum amount of automobile insurance. Many states can impound your vehicle, issue hefty fines, or even jail offenders who refuse to pay for mandatory automobile insurance.

Okay, so what if you have such a bad credit score, that you can’t get automobile insurance? Hmm...that’s a good question. The states that require consumers to purchase automobile insurance, at rates set by the insurance industry, based upon a consumers credit score, usually have a state-run high-risk insurance plan for consumers with bad credit and other high-risk drivers. So if a consumer can’t get automobile insurance because of a bad credit score, then they would be grouped along with high-risk drivers.

What is a high-risk driver? A high-risk driver, is someone who has been convicted of driving while intoxicated, driving under the influence, vehicular manslaughter, drug possession, or it could just be anyone who has an excessive amount of traffic tickets or numerous accidents on their driving record.

Now back to the initial question: “How do credit cards affect your insurance rates?” Answer: Too much credit card debt, too many late credit card payments, and any credit card delinquencies on your credit report, and you’re looking at a hefty insurance rate.

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