How Credit Score Affects Car Insurance Premiums

Ever since we started offering car insurance in UAE, we get numerous queries from our customers. Some of them are first-time car owners, others are foreigners, while a few are looking to get the cheapest car insurance in UAE. We try our best to answer all queries. We recently realized that a lot of our customers are asking about how credit or credit score affects the car insurance premium. Well, we are going to address this question in today’s article. Let us start.

Before answering, let us discuss the multiple aspects of the credit score.

Credit Score Components

· Payment History

Late payments have a negative impact on your credit score. Interestingly, even if you delay paying your bills, it will count negatively. Hence, whether it is loan payment or utility bills, pay everything within the due date.

· Duration of Credit History

Most insurance companies look into data for the past seven years. Anything beyond seven years will not be used to determine credit history.

· Credit Type

If you have taken out a loan or are using a credit card, the insurance companies will take them into account.

Credit Score and Insurance Companies

Nearly every insurance company in the UAE and globally use the credit score to determine the premium. Why? Well, the most straightforward answer is that the credit score helps them decide whether you are worth the risk. If you have a bad credit score, it means that you are more than likely to skip an insurance payment. Delayed payments are a headache for insurance companies.

On the other hand, a person with a good credit score will always pay all dues (including insurance payments) within the due date. Similarly, a good credit score means that the person leads an orderly life and are responsible. In other words, they play it safe and are less likely to take risks in life or even when driving. A safe driver is highly welcomed in the car insurance industry.

How to Improve the Credit Score

Even if you have made a few bad choices in the past, don’t worry. Why? Well, you can improve your credit score. Here’s how.

· Pay Bills on Time

Whether it is a phone or utility bill, pay everything on time. Even if you are a day late, it will count as a late payment. By now, you know that late payments will not do your credit score any good. If you have taken out any loans, pay them back on time too.

· Don’t Use the Credit Card too Much

Avoid using credit card for unnecessary expenses. It is better to use a credit card only during an emergency.

· Pay off Debts

If you have any outstanding debts, pay them off.

· Don’t Open New Credit Cards

Most people have a bunch of credit cards as they all offer different benefits. Don’t be like such people. Instead, keep a single credit card and use it sparingly.

Wrap Up

This concludes our blog post. Whether you like it or not, a credit score plays a crucial role in determining the car insurance premium. Therefore, instead of trying to work your way around it, we recommend that you improve your credit score. Once you have a good credit score, your insurance premium will drop down automatically.