Surprisingly, your credit score has a significant impact on your auto insurance premium. Whether you`re satisfied with your monthly rate or not, rest assured that how well you measure up financially helps determine how much you pay.
The Case for Credit Scores
While there is no indisputable proof of a correlation between a consumer`s credit score and how often they make use of their car insurance, insurance experts believe that such a connection exists.
According to such experts, consumers who regularly take financial risks are more likely to file insurance claims. Risky behavior includes opening multiple credit accounts, being late on credit product payments and carrying a high amount of revolving debt.
Why Does It Matter ?
There is no blatant claim which states that financial irresponsibility goes hand in hand with car accidents but the implication is there. Common sense indicates that someone who can`t pay their bills on time might be reckless in other areas of life, including driving a car.
Some may say that because there is no solid scientific evidence to support such assumptions, the vehicle insurance agencies practice discrimination against their prospective clients.
However, the unexplained link between insurance claimants and their negative credit activity does exist and that alone makes the credit score relevant in the eyes of the insurers.
Insurance agencies were established as profitable business opportunities first and foremost. They are there to support their clients` needs in the event of an emergency, but a client who pays for the peace of mind of being insured is more profitable than one who actually needs to make use of the service.
Ways To Decrease Your Premium With The Help of Your Credit Score
Most common credit actions, such as filing for a loan or taking out a mortgage, can make you out to be a financial risk if the numbers don`t add up. You can control the outcome, however. Take note of these tips to decrease your premiums.es
Check your credit report
A credit report may contain errors. Payments can be overlooked, bills can be wrongfully attributed, records may not be up-to-date and in extreme cases, identity theft may play a role in the demise of your score.
Checking your report from each of the three credit companies will eliminate any unpleasant surprises and allow you to rectify any mistakes.
No one specific credit model is used by all car insurance companies to determine your premium. Each company creates its own model, so your score will carry different weights among the carriers. Find the company with the lowest premium and stick with it indefinitely or until your credit score improves.
Pay bills on time
Nothing boosts your credit score like timely payments made in full. Practice responsibility with every financial entity and you will be rewarded with a lower car insurance premium.
Frequent credit activity has an effect on your credit and this can play against a lower premium for you. Many online sources can help you maintain your credit cards, loans, mortgages and other accounts in such a way that will reflect your responsibility in a positive light.