Why Credit Score Is Important to Car Insurance
Even though is does not seem logical or fair, the reality is that your credit score can have a dramatic impact on your car insurance costs. Unless you live in a state that forbids the practice, like California, Massachusetts or Hawaii, or you have a credit score above 750, you could be paying 30 to 40 percent more for car insurance if your score is placed in the bad credit lane. Find out more about why insurance companies make it a big deal to have an excellent credit score. Plus, check our website for free online car insurance quotes.
Many insurance companies do factor a credit score into its insurance policy rates. The logic for them is if you are not responsible enough to pay your other bills, you’re going to be just as irresponsible with your car insurance payments. In their view, they’re justified charging a higher than average premium for people with low credit scores because they’re a high credit risk.
The insurance companies aren’t just worried that you will miss a payment. They also see your bad credit history as an omen that you will not be responsible with your vehicle. That makes them worry they will spend money fixing your next mistake, and that’s reason enough to increase your car insurance premiums.
There are several ways for a driver with a poor credit score to reduce car insurance premiums. The first course of action is to shop for car insurance companies who don’t participate in credit scoring. Also, a car insurance company may be less inclined to consider a credit history if you are paying the policy in full up front instead of monthly or quarterly payments. If you have to pay more for anything due to a bad credit score, you should make a concentrated effort to pay all your bills on time.
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