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Since 1999, the #1 Motorcycling Magazine for Women and the Men Who Ride with Them

Your Credit Score: Can it lower your premium?

A smart way to reduce your rates

Exclusive to WRN from Markel American Insurance Company

Will improving your credit score lower the premium for your motorcycle insurance?
It just might. Always trying to win your business with lower rates, insurance companies have found a better formula, using elements of your credit score, to predict how responsible a rider you are, and the likelihood that your riding will result in a costly claim.

Imagine a perfect world, one where your insurance company could actually see into the future and know for certain that you were not going to have an accident during the upcoming policy year. Your premium could be set very low to cover overhead and handling costs only. On the other hand, if they knew for certain that you would have an accident in the coming year, the premium could be set high to cover the entire costs of the claim that was going to occur. Claim-free riders would never have to contribute to the claims caused by other riders.

Obviously this perfect world scenario is not possible. But some insurance companies have been using a better formula to help them predict the risks of having to pay out claims, which translate into lower rates for responsible individuals. It's called "insurance scoring."

This better formula is based on parts of your credit report. Financial responsibility has proven to be an effective predictor of an individual's responsibility in operating a motor vehicle -- and the likelihood of causing a costly accident. Combined with the other criteria used by insurance companies in computing your premium, your insurance score usually makes use of the following five categories (visit to learn what is included within each category):

Payment history Amounts owed Length of credit history New credit recently opened Types of credit used

While the rules vary from state to state, the following items are among those not used to calculate an insurance score: race, age, address, gender, marital status, national origin, religion, employer, salary or wages, whether you're seeing a credit counselor, and any other "non-responsibility type" information not proven useful in predicting insurance risk. In addition, Markel is one company that does not cancel or refuse to renew based on the credit-based insurance score.

Why insurance scoring is good for you
What does insurance scoring mean to you? There are several immediate benefits:

Insurance scoring means you're not given a rate based solely on the typical criteria of age, accident record, traffic violations, claims record, etc. Insurance scoring provides an additional way for insurance companies to measure your responsibility.

You can improve your score and lower your rates

It only stands to reason that if you can improve your credit score, you might also be able to improve your insurance score…and lower your premium. According to, there are five tips that can help you work towards a lower premium:
1. Pay your bills on time, and if you're behind, get caught up.
2. Keep balances low on credit cards and never move debt from one card to another. Also, don't open new credit cards that you don't need (this includes store-specific or gas station cards).
3. If you're young and are just establishing your credit, don't open a lot of accounts too quickly.
4. If you are looking for new credit, do your rate shopping first and then make a single application, rather than making more than one. Multiple credit inquiries to the credit bureaus can be a negative. It's important to note, however, that when an insurance company accesses your credit report to develop an insurance score, it's considered a "soft hit" on your credit and does not affect your credit score. This is also true of "promotional" inquiries, for example, a credit card company approaches you to sign up and tells you that you're preapproved.
5. Having credit cards and installment loans can improve your score if you're always on time with your payments. Don't just open accounts to try for a better mix: it probably won't help.

Bottom line: insurance scoring helps make sure you're not paying more than you should for your motorcycle insurance. Since the majority of people have good credit, the addition of insurance scoring means most people will pay less for insurance.

Related Articles:
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Insuring Your Motorcycle Accessories
Common Misconceptions About Insurance
Motorcycle Insurance: 5 Commonly Asked Questions

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