How does your credit score affect your car insurance rates in Canada?

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Your credit score is a factor in numerous aspects of your daily life. It can affect everything from your ability to secure an auto loan for a pre-owned car, to your capacity to apply for loans and credit cards. Because your credit score can be the basis for determining your ability to qualify for numerous loans, it’s difficult to determine what is (and isn’t) dependent on a low credit rating within Canada.

At Ride Time We have many customers who aren’t certain whether their credit score impacts the rates of insurance. We’ll go over the impact of bad credit on rates of insurance in Canada.

Canada’s Rules For Use Of Credit Scores In Car Insurance Vary Based On Province

In certain parts of Canada in some areas, it is illegal for insurance companies for cars to check the credit scores of customers when they make an application for insurance or make an insurance claim. In reality, one insurance company in Ontario was in legal trouble because of this when a client was involved in an accident and made the insurance company with a claim.

But this isn’t the case everywhere. Here’s the information you must be aware of.

The law in Ontario in Ontario and also in Newfoundland and Labrador is against the law for insurance companies to consider your credit score to underwrite auto insurance. The elements used to determine your credit score include your criminal history and your previous accident convictions, however, your credit score does not have an impact on the rates they offer.

in Alberta, an insurance company must obtain explicit consent from a prospective customer before examining their credit score. In addition, the client is free to refuse to consent.

There are other states where there are not any rules or regulations regarding the use of credit history in determining the rates of insurance. If you live in British Columbia and Manitoba this is not a problem since auto insurance is controlled through the provincial government.

However, in some provinces such as Nova Scotia and Saskatchewan insurance companies might be capable of looking at your credit history and utilizing it when determining an estimate, if they choose to.

Can I Save Money By Letting Insurers Look At My Credit Score?

In certain cases in cases, yes. In states where insurance can influence rates, insurers will examine your credit score as a result of insurance. This differs from a traditional credit score, however.

Credit-based scores comprise of:

Pay history (40 40 percent)Timeliness of both current and previous payment of debt

Outstanding debt (30 percent) How much do you owe

Credit history length (15 percent) (length of time) you’ve held a certain type of line.

Credit applications for new customers (10 percent) If you’ve made an application in the last few days for new credit lines

Credit mix (5 5 %) The various kinds of credit lines (mortgage auto loan, credit card) you have

Interestingly, personal and demographic data like income, age or marital status, and other similar variables are not considered in this assessment.

In the end, if you have a high credit score, odds are you could save a few dollars by letting insurance companies take a look at the score of your credit. A poor credit score could increase the rate.

However this practice is less widespread in Canada as it is in America 85 to 95 percent of American insurers utilize credit as an aspect of their insurance quotes however, many Canadian insurers are not allowed to use credit in the same way in the same way, as mentioned earlier.

Why Would Insurers Care About My Credit Score?

It’s a great question that has been asked more frequently as businesses in provinces such as Quebec start using scores for insurance based on credit to determine the rates for auto insurance.

In essence, a credit-based insurance score analyzes your credit history and draws connections to prior insurance claims of other people with similar scores which allows insurers to evaluate the level of risk.

The proponents of this method in the insurance industry for automobiles claim that credit score is a “good metric of financial responsibility” and that this could mean that a person who has a good credit score will be less likely to be in an accident.

The opponents of credit-based insurance for cars claim the reverse, saying that credit scores are completely not a factor in the likelihood of injury to the body during a collision or accident in a car.

Certainly, the use of credit to decide rates has negative effects on Canadians who have bad credit. Even in the case that your credit score is not great, however, the good news is that it’s not a major aspect of the price of insurance. As long as you’ve got an outstanding track record of driving and keeping clear of tickets and other accidents and citations, you’ll probably be able to get a reasonable estimate!

Come To Ride Time For A Used Car – Even With Bad Credit!

We are at Ride Time We specialize in servicing Canadians who have bad credit. If you can provide us with an original Canadian license with evidence of employment for three months and a payslip with a total income of $1,500 before deductions, we’ll work with our network of lenders that includes 15+ to offer you an excellent loan for an excellent used car.