Bad Credit Can Be Affecting Your Auto Insurance Premium

Bad Credit Can Raise Auto Insurance Costs

Many consumers do not realize that their insurance company pulls a copy of their credit report before issuing them insurance. Why? Because most insurance companies believe there is a direct correlation between a person’s credit risk and the potential for general risky behavior. Therefore, if you have bad credit, prepare to pay more for insurance.

Why Your Credit Score Matters

Insurers have been using data from credit bureau reports to help accurately price automobile and other insurance policies. Many insurers and lenders view a FICO Score, the most widely used credit score, of over 700 as a good mark to aim for and 760 is often considered excellent.

There are a few key things you can do to protect your credit score and help with the cost of insurance premiums. The fastest way to a great credit score is to pay your bills on time, keep your debt to a minimum and maintain a good credit utilization ratio by charging as little of your credit limit as possible. You should also check your credit report at least once a year to ensure that everything looks right. If you find a discrepancy, you have the right to remove it.

Several Insurers Offer Insurance Discounts for Good Credit

Most people understand they can save on insurance premiums by combining their homeowners and auto policies, remaining accident free, continuing to be loyal to a certain insurer or paying their premiums automatically. However many insurance customers do not realize they may qualify for an additional insurance discount on their premium for maintaining a good credit score. Your credit score may be factored into your original rate quote, but you may also qualify for an additional discount if your credit score is high enough.

You May Need to Ask to Save on Insurance

In most cases, insurance customers cannot apply for a good credit score auto insurance discount directly on an insurance application. The best course of action is to ask your insurance agent or your company’s customer service representative directly for a discount if you know that you have a great credit score. While many insurers may not give an additional discount, some have unadvertised discounts for good credit scores if you ask specifically for the insurance discounts for credit worthiness.

While most insurers use a customer’s credit score to help them determine the cost of a customer’s insurance premium, many people can also receive additional insurance discounts for a great credit score. Insurance companies have come to believe that customers with a good credit score are also good insurance risks, and insurance consumers can reap the benefits and save on insurance costs by maintaining a good credit score.

Hank Coleman is the leader writer for CreditScore.net and the founder of several other financial websites. He is a freelance writer, entrepreneur and professional in the government sector. Hank holds a Bachelor’s Degree in Business Administration, a Master’s Degree in Finance and is currently studying for his Certified Financial Planner (CFP) credentials. Be sure to follow him on Twitter.