How Does Credit Impact Your Auto Insurance Rates

There are many factors that impact your auto insurance rates:

Driver age

Number of miles you commute to work

Type of car

Your driving record

Options on the car such as security alarm system

Deductible

However, one factor that most drivers are not aware of is your credit rating. The auto insurance industry went through great pains to convince the government that there was a strong correlation between one’s credit rating and their insurance risk. The vast majority of auto insurers use the credit score to determine the likelihood you will file an insurance claim. Less auto insurers use one’s credit rating to determine premium rates. Regardless, you should shop around for your auto insurance. You can check your credit score here in case you are unsure of your credit rating.

How many of you are familiar with the term FCRA? It stands for the Fair Credit Reporting Act and it is under this Act that insurance companies are allowed to check your credit before issuing you a policy. Under the terms of this Act, the auto insurer must obtain your permission to pull your credit report before evaluating your insurance risk. GOOD NEWS – this inquiry will not negatively impact your credit score. Therefore, there is no negative impact to your credit by requesting multiple quotes for your auto insurance.

What happens if your credit rating changes after you have been issued your auto insurance? The insurers are allowed to check your credit when recalculating premiums for renewals. Therefore, if your credit score changes, either positively or negatively since the last time your premiums were set, you should get multiple quotes to make sure you are paying the most competitive rates. Remember, it costs you nothing to get an auto insurance quote.

What can you do to improve your credit?

Reduce the number of credit cards you carry. Less accounts with low balances can actually improve your credit score.

Payment History – pay your bills on-time. On a credit card, even if you cannot pay the entire balance, make sure you pay the minimum amount due on-time. This will demonstrate you are a responsible individual.

New accounts. If you recently applied for a number of new credit cards, this may cause your credit score to go down. The good news is that if you wait and do not apply for new credit cards, your credit score will come back up. Avoid the temptations to apply for more credit cards – that towel of your favorite sports team is just not worth it.

Focus on maintaining a good credit rating. It will help you:

Secure a loan

Secure a loan at a good rate

Obtain auto insurance at the lowest possible premiums; and

Reduce stress thus maintaining your health and minimizing health costs

Good credit goes a long way. If you have specific questions about your personal credit situation, I suggest you visit the Credit Pro at www.creditoffline.com