What You Should Know about Credit and Car Insurance

November 15th, 2017 | Author:

[I]f you have poor credit, you probably know it will impact your ability to get a credit card or loan. However, it can also influence how much you will pay for car insurance. The connection between credit rating and car insurance may seem odd to consumers, but it is an essential combination for insurers.

Taking Risks

Insurers are taking a risk in insuring you. They must determine how likely you will be to file a claim. Studies have been done that show people with bad credit are more likely to have a claim and the claim will be higher than for those with good to excellent credit.

For a person with bad credit, this means they will probably pay as much as twice the amount in premiums to get insurance. However, there are things you can do to improve this situation.

• Shop around for the lowest insurance premiums. While all insurers may look at your credit, their rates may not be all the same.
• Know what your credit report says and dispute any errors. You want to make sure your credit report doesn’t show any negative information that isn’t true.
• Work on improving your credit by making payments on time and paying off any old debt you can.
• Review your rates in 6 months or a year. As your credit improves, you can get a better rate, so shop around again when it’s time to renew your policy.
• Raise your deductible. As you take on more risk, insurers will have less risk and will reward you with loser premiums.

It’s not a quick fix to improve your credit, but it can save you money in the long run with insurance premiums. Just make sure you check your credit rating by getting a free credit report before you shop for car or home insurance. That way, you can make sure everything is up to date so you can get the best rates possible.

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