Why do insurance companies use credit as criteria for calculating premium and underwriting an auto insurance policy?
A. Insurance companies group consumers based on their credit history because data shows, and a number of studies have proven, that credit history is a good predictor of future accidents. This is not to say that all people with a poor credit history will have an accident. But by using information about credit history, in addition to the other information collected, insurance companies are better able to underwrite policies and offer consumers the most accurate rate possible.
