If you’re looking for ways to bring your auto insurance premiums down, you need to consider the role of your credit score. In case you haven’t had to deal with your credit score before, this is the number assigned to you by financial rating companies that is supposed to indicate the likelihood of you paying your debts and bills.
Auto Insurance and Credit Rating
You may not know it, but today most auto insurance companies factor in your credit rating as part of their risk evaluation process. Currently, there are only three states in the U.S. where auto insurance companies are banned from considering your credit score when determining rates: California, Hawaii, and Massachusetts. All other states are allowed to obtain your credit score for use in determining your auto insurance premiums.
How Your Auto Insurance Rate is Determined
There are quite a few factors that are used to arrive at the rate you have to pay for car insurance. Your driving record is one of the most important considerations for insurers. Many other smaller details are also factored in such as your age, your gender, where you live and even the kind of car you drive.
Traditionally, rates were based on these types of car-related or driving-related factors. However, after study data released in the early 2000’s showed a correlation between a consumer’s credit score and their insurance claims, car insurance companies began to factor in this number. But, they don’t just take the number and adjust your rate accordingly. They use your credit rating to input into their own model to determine exactly how risky they think insuring you might be for them.
What to Do If Your Credit Score Is Low
Taking steps to raise your credit score is always a good idea. Your score has far reaching implications in your life, even beyond your auto insurance premiums. So, if your credit score is less than great, and likely costing you money, here are a few things you can do to give it a boost:
- Pay your bills on time
- Do not skip payments
- Correct any errors
- Keep your balances due low
- Don’t open too many charge accounts
You should obtain a copy of your report, at least yearly, to keep an eye out for errors. If you are really serious about increasing your credit score, you can hire a company to advise you on steps to take.
Until you get that score back up, you may want to shop around for better auto insurance rates. Using the InsuranceWins form will show you the latest competitive rates for you and may just save you some money right away.
