Credit Scores – Not Just a Number When It Comes to Car Insurance

Credit Scores – Not Just a Number When It Comes to Car Insurance

When it comes to auto insurance…your credit score isn’t just another number. It can actually dictate how much you’ll pay for coverage on your vehicle. If you don’t know your credit score…whether it’s 500, 650, or 800…now might be a good time to find out what it is. It could explain the sudden rise in your auto insurance rates despite a clean driving record.

During tough economic times, almost anyone can face hardships that can change good credit to bad rather quickly. The loss of a job, a serious medical issue, a death or divorce can wipe out your bank accounts and leave your credit in a tail spin. Unfortunately, once your credit is shot, it can affect many things, including the interest rate you’ll pay should you want to buy a car, not to mention the insurance rate you’ll pay to insure it.

While you can reduce certain expenses by cutting back on energy usage, entertainment, and dining…you can’t cut back on car insurance. It’s a requirement if you own a car and plan on driving it. And, if you’re trying to get quotes for cheap insurance or simply reduce the cost of your existing premium, your credit score can affect the outcome.

Here’s the reason why: Many insurers regard your credit score as a reflection of your personal responsibility and overall commitment to paying your bills. And, if you’re habitually late or miss paying them, no matter the reason, your credit score will obviously be lower than someone who shows dedication in paying their obligations on time. To compound the issue, if you have a history of tardiness or defaulting on your credit card payments, you’ll be statistically judged as a greater risk behind the wheel…whether that’s true or not.

Of course, that doesn’t necessarily mean you can’t get cheap insurance. It just means you have to shop around and do everything you can to improve and manage your credit score. In case you’d like to know how to do that…below are a few tips to help raise your credit score and make your insurance shopping easier.

1. First find out your credit scores. Check all three credit reports for inaccurate information. The credit agencies allow you to contest any incorrect or erroneous entries in your credit files.

2. Be sure to check the reports from Experian, TransUnion, and Equifax closely for any inaccuracies. It’s important to do this because a single bad entry can greatly affect your chances of obtaining cheap auto insurance.

3. If you have discrepancies, fix them immediately. On the other hand, if your credit score happens to be what it is due to a string of late or missed payments, you can improve your credit score by starting to show a pattern of paying on time. With outstanding balances that can be negotiated with debtors, do so. Reduce the burden for quicker payoff. Even if you have judgments in your credit file, by negotiating a settlement, you can still impact your credit rating in a positive way.

If you’re currently insured and have a personal relationship with your agent, talk to him and explain your situation, especially if you’re experiencing financial difficulties as a result of losing your job or a divorce. Keep in mind that many other factors can go into assessing your auto insurance rates, your credit score being one of them.

So, if you’re looking to lower your premiums, make sure you’re getting the best rate on your car insurance by shopping around. Why not get a free auto insurance quote today?

Has your credit score affected your car insurance rates? Feel free to share your thoughts in the comments section below.