If you have experience in leasing or other types of mortgages, you may not be surprised that your credit score becomes a factor. When you want to buy car insurance, a question like, “Does your credit score affect car insurance?” may pop into your mind. Through this post, you’ll find the proper answer to your question.
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Answering the Does Your Credit Score Influence Car Insurance Question
Maintaining a good credit score has become a must for car owners as does your credit score affect car insurance. Many car insurance companies in the US apply credit-based insurance scores to help them make decisions about the risk when they offer insurance quotes. Here is some information about how this system works:
1. The Thing Called Credit Score
Credit score, also can be called FICO score, is a score that rates your eligibility when applying for a mortgage or insurance. The average range of credit scores is usually from 300 to 850. Therefore, the higher you get, the more likely your mortgage or insurance will be approved.
A credit score is taken from your credit history. It includes the types of loans, length of credit history, repayment history, length of credit history, debt utilization, and the number of accounts you have.
2. Your Credit Score and Your Car Insurance Rates
Your credit score is an instrument to check your responsibility to pay premiums timely and the type of risk you may have to the insurance companies. Additionally, credit score correlates to the chance of you filing a claim. Thus, these will influence your car insurance premium that you have to pay regularly.
There is a certain link between how does your credit score affect car insurance and the insurance premium rates. When a person with a low credit score wants to buy car insurance, the risk of losing borne by the insurance company is higher.
Instead, insurance companies are very likely to look to people with high credit scores. Since this kind of person seems more reliable to pay the premium timely. With a high credit score, the severity of your risk to the company reduces.
All in all, your credit score somewhat does affect your car insurance. Many car insurance companies use the credit score to decide the premium that you must pay regularly. The higher your credit score is, the lower risk will be faced by insurance companies. Therefore, your regular premium will be lower, too.
Improving Your Credit Score
Get a poor credit score after checking it with a trustworthy institution? Do not lose hope in finding suitable car insurance for you. There are several steps that you could do to erase your fear of the question “Does your credit score affect your car insurance”. Here is the explanation.
1. Pays Bills on Time
Do not postpone your bill payment when the due time has come. Pays all your bills including credit repayment, utility, and other household bills. When you do not pay your bills on time, there will be bad records on your credit history. The car insurance companies will see you as a person who won’t pay the premium timely.
2. Manage Accounts Wisely
Control your credit limits to stay below the limits and reduce your debit balance whenever possible. Moreover, creditors and service providers will report your whole transaction such as missed, late, or defaulted payments.
If you go beyond the limit of your account, surely this will be a bad history to your credit history and decrease your credit score.
3. Apply a Mixture of Credit Options
Possessing several credit accounts makes one able to manage different types of loans. It shows you that you manage your accounts well and can pay the credit on time. Instead, if you do not use credit at all, your credit score may be low, although you have a good income.
4. Keep Your Spending in Check
Besides mortgage, loan, or credit card, you also must keep up with things besides them. If you can manage store cards, mobile phone contracts, or other household bills, you can show that you have great managerial skills.
Moreover, if you can check your spending regularly and maintain your credit close to your limit, it indicates that you are a reliable person on credit. This also suggests the car insurance companies see you as an eligible person for their service.
5. Solve Your Financial Problems Early
If you have financial problems related to your credit, you could ask a third party to help you to overcome the difficulties early. Bankruptcy will negatively affect your credit score for about six years, so you must avoid it if possible.
Although some insurance companies still offer car insurance to people with poor credit scores, the process and the premium will be different from people with good credit scores. Therefore, try these tips to improve your credit scores and free yourself from the ghost of “Does your credit score affect car insurance”.
Do You Understand Why Credit Score Affects Car Insurance?
It is true that the topic of “Does your credit score affect car insurance” can be something that causes worry for some people. Furthermore, it is indeed applicable to whom are in poor financial condition and do not have many options in their hands.
However, you could improve your credit scores with those steps above which seem like some simple steps to manage your balance regularly. With a higher credit score, you could get better car insurance premium rates. Meanwhile, if you have poor credit insurance you may have to pay more for the coverage.
Be Careful of Your Credit Score Before Getting Car Insurance!
Remember that every insurance company has different policies related to your credit score as well as the way how to deal with it. If you have good credit scores, find a car insurance company that will give you discounts on your insurance rates.
However, if you do not have very good credit scores, you must compare multiple car insurance quotes and find insurance companies that provide car insurance with proper coverage but places less significance on credit scores.