Auto Insurance Premiums

• Each auto insurance company has its own formula that it uses to calculate the cost of the premiums that it will charge a driver. In all cases, the company will charge riskier drivers -- drivers considered to be at more of a risk of an accident -- higher premiums, as these drivers will, statistically, cost the company more money in the form of payouts. Drivers with poor credit are generally considered riskier.
  
  

Bankruptcy

• When a person declares bankruptcy, his credit score will suffer damage. If the person's score it good, the damage will be extensive; if his score is already relatively low, it may be severe. However, in all cases, a person will come out of bankruptcy with a relatively low credit rating. This is because, under bankruptcy, a person may see some of his debts dismissed or else the time limit he has to pay them back will be extended.
  
  

Credit Score

• Although a person's credit score may have little to do with a person's driving ability, insurance companies generally believe that drivers with lower scores tend to get in more accidents. The insurance companies may find a statistical correlation between low scores and auto accidents, or they may link a failure to pay back debts to a lack of responsibility. In either case, a lower credit score generally translates into a higher premium. However, not all insurance companies use a person's credit score to calculate premiums.
  
  

Considerations

• All bankruptcy will hurt a person's credit rating; any person who is filing bankruptcy likely does not have a very high score to begin with. Therefore, bankruptcy may not raise the person's premiums by very much. Although auto insurance companies usually look at a person's credit score when calculating rates, some may look at specific credit events, too, such as bankruptcy, and charge more based on the presence of negative events.