Does My Credit Score Affect My Auto Insurance Rate In Georgia?
Reader question:
Does my credit score affect my auto insurance premium?
Max
Atlanta Georgia
Thank you for your question, Max.
Georgia auto insurance companies have been looking at the credit reports of prospective customers for years, but it is only recently in the past twenty years or so that, with the advent of computers and the internet, they have been able to gather that information into a final number, called an insurance score, which is used in the calculation of your auto insurance premium. This insurance score, based on information in your credit report, can be the difference between a person with a good driving record but a high insurance premium, and another person with the same record and a much lower premium.
- Is it legal?
In some states, the question has come up as to whether or not credit scoring with car insurance premiums is discriminatory against low income and minority groups. While it does affect people who fall into these categories more than most, it doesn’t anymore than credit scoring affects people when buying a car or doing anything else that requires credit.
As great as it would be for auto insurance companies to give out premiums that are low cost regardless of risk, that is simply how business works. In order to make money, they need to charge the people who will cost them more money higher premiums, so that the people who are less likely to file a claim don’t have to pay enormous premiums. Insurance companies make a lot of money, but the profit margins aren’t as consistent or large as with other types of companies, so it is a kind of tightrope walk.
- Why do they do it?
Now that we’ve covered the fact that insurance companies need to charge more to people with higher risk, how are people with bad credit histories higher risk? After all, your credit score doesn’t affect your driving, does it?
Technically, it doesn’t, but there are a lot of factors that don’t necessarily affect your ability to drive, such as your grade point average, which auto insurance companies consider when figuring out what your premium will be.
What companies have figured out is that people with bad credit history tend to file more claims than people with good credit history. One of the reasons is, for example, that people who live in dangerous areas are more likely to have bad credit, and thus are more likely to have their car stolen, which would raise comprehensive insurance rates.
Some people claim that this credit report shouldn’t be used by Georgia auto insurance companies, because correlation is not the same as causation. That means that just because people who have bad credit scores file more claims, it doesn’t mean that the credit score had anything to do with it.
Cheers,
Fashun Guadarrama.
Georgia Student Car Insurance Discounts
Reader question:
What kind of deal can a busy college student get on her Georgia car insurance premium?
Maggie
Great question, Maggie.
I guess it all depends on why you’re busy! Georgia car insurance companies are both very punitive towards students because of their age, and at the same time pretty kind to them. Although your initial car insurance rates might be twice as much as those of someone twenty years older than you, companies offer you a variety of breaks that allow you to purchase your car insurance premium at a more reasonable price.
A favorite break of mine is the good student discount, which is offered by most companies and allows students to get a certain amount off of their insurance premium if they make certain grades. The requirements differ depending on the state and the car insurance company, so to be certain of how you will benefit, call your agent first.
Here’s a list of companies and how they treat the good student discount.
- GEICO offers a car insurance discount to students between the ages of sixteen and twenty five. In some states, you have to be unmarried and under the age of twenty one to benefit, but they don’t offer state specific details. In order to get the discount, you have to get a B average or above. The amount of the discount can be as much as fifteen percent off of your car insurance premium. GEICO has a lot of discounts, as a matter of fact, and if you think you might be eligible for more than just the good student discount, you should consider checking out their website and/or calling an agent to see where you stand and how that would affect your rates.
- Farmer’s Insurance is a little more strict in its requirements. In order to qualify, you must be unmarried; under the age of twenty five; you must be a full time student in either high school or college; you should be in the top twenty percent of your class; you need to have a B average or higher; and, if your school has a Dean’s List or Honor Roll, you need to be on it. Tougher, but if you’re as a busy a student as you say, you’ll probably be able to make it.
- Esurance also has a deal for good students who are enrolled full time in either high school or college. For these dedicated young people, qualification for the car insurance discount requires you to be under twenty five and have a grade point average of at least 3.0. Some states have additional requirements.
I hope this information was helpful to you, Maggie. Of course, these aren’t the only three companies that offer the good student discount, but looking at their requirements does give you a good idea of what to expect even if you’re going to go with a different car insurance company.
Cheers,
Fashun Guadarrama.
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