The main reason some insurance providers use your credit score is because they have found a direct correlation between a consumer's credit history and claims that happen. Therefore, the insurance companies feel that people with better credit reports are not as likely to have serious insurance claims.

The insurance companies that use credit history still use several other factors in figuring your insurance cost. Some other factors they use are your age, driving history, type of vehicle, where you live in calculating the cost of your insurance. For this reason, if you have a bad credit score, the insurers that use credit reports probably are not the right choice for you. You may not be eligible for certain discounts, which could result in higher premiums.

Some insurance companies will view your full credit report when determining your rates, however many will use what is known as an insurance credit score. This is developed by using statistical analysis to predict the likelihood a consumer will have a greater chance for loss. These scores are similar to what lenders use to determine the chances of an applicant repaying a mortgage or loan.

If your credit score is low, there are ways to raise it to get better rates.  Be sure to pay your bills on time.  If you have credit card debt, pay it off as quickly as possible.  These are just a few of the ways to raise your credit score that will result in lower auto insurance premiums.