A good credit score increases the chance to borrow and qualify you for cheap auto insurance rates. When there is a clear sign of money mismanagement lenders can refuse applications for loans or charge much higher rates. In the same way, some automobile insurance companies can offer up to 25% discounts to motorists with excellent ratings. In addition, landlords and other interested parties may want to see it before they agree.
Improving or keeping current decent record is more important than many people appreciate. Most people realize how important it is only when their loan applications are refused. The situation is even worse among motorists because many of them still ask do vehicle insurance companies check credit? Large number of them certainly do and it increases day by day. Only few of them may not bother but their prices may already be high.
Does Credit Affect Auto Insurance Rates?
If you haven’t looked into how to reduce premiums lately you may still have traditional views on possible savings. Until recently underwriters used to mainly look at age, driving record, claim history and zip code when they calculate quotations. Lately, they have been looking into many other factors that have nothing to do with driving like, home ownership, education and occupation.
One of the main reasons for this switch is the fact that they have found correlation between credit score and auto insurance claims. It has been statistically proven by many studies that people with no money problems often tend to cover for small damages out of pocket. Initially, state authorities were reluctant to allow them look at it while considering applications but they had to agree to this practice after seeing the evidence. Currently, most of them check it when they give a quote. There are only 3 states that don’t allow this practice and few automobile insurers that don’t check credit. Otherwise, the score influences most vehicle insurance premiums.
Underwriters like to include anything that is proved to be influencing claims into calculations, partly because they can thanks to computer programming capabilities. Even though companies look at many more factors now while determining premiums they can still give you a firm estimate in a few seconds. That is the reason why there are a few websites that allow quick quotes comparison online today.
How Much Does Credit Score Affect Car Insurance?
There are so many factors that influence premiums from how you pay to where you live. However, probably it is one of the most influential factors depending on where you live and the provider. While some of them are still looking at driving records as the main risk indicator a few has moved on to new factors. Some insurers offer as much as 20% discount to drivers with good credit score. That is why to whom you apply can be very influential over the final amount.
If you have an excellent financial trail you should be seeking for the largest discount offered for it. You may still be able to keep the premium low even after a recent accident claim because of a large discount you receive for managing finances better. If you already have it good you should make the most of it by getting the largest savings for it. If it is bad you should definitely read how to improve it below if you want to get twenty percent discount.
Again, you should always compare prices from different sources. You have a better chance of saving money if you haven’t compared quotes for a few years now. A few recent studies show that people aren’t doing their best to get lower automobile insurance quotes and there are so many policyholders who haven’t looked at alternatives for years. There are so many things that could have changed since you last bought a policy. For example, the score keeps changing every so often depending on financial transactions and other details. Therefore, it is a mistake not to check for alternative quotes.
You will need to follow a completely opposite strategy if it is poor or has been falling lately. In that case, you should be looking for the best auto insurance for people with bad credit. Every carrier has its own proprietary premium calculation formula that separates them from others. As mentioned above, some underwriters still believe in traditional factors as their main indicators and pay little or no attention to it.
10 Steps to Improve Credit Score
It is essential to understand what matters for these agencies and know how to boost. Only few agencies are used by most lenders or carriers and they look at a few indicators to determine the overall figure. You need to know what they are looking for. Here are a few pointers to show how to redraw your fiscal map so that you can turn its negative affects on vehicle insurance rates to a great discount. These tips will help you avoid mistakes that cost you points.
- You Should Get Your Report
First of all, you should get the report and see. Some agencies can allow you to look at the history whenever you want for a small monthly fee. This plan can usually be cancelled whenever you want. You can also obtain a free report once a year from each of them. Remember, you don’t need to request them all at the same time. If you request from another one every four months, you can monitor it year-round. Regular checks also help in detecting identity theft quickly.
You should deal with any inaccuracies at this time. If you see something that shouldn’t be there you can contact them and get it corrected. It will eventually get corrected by the agencies and improve rating. You should know that pulling own report doesn’t affect the score.
- You Should Have a Look at the Report
You should take time to read it through and observe what is included in it. Remember that insurance credit rating is largely based on the score. There are clues there about what matters and what is taken into account. You will see;
- Address details and other people that are linked to you due to sharing the same address.
- Payment histories including when the facility was set up, how much is the loan amount and how much of it is used or paid back.
- All the applications you made regardless of being successful or not.
- All the checks on you carried out by third parties.
- Any payment arrangements in place like direct debits for utilities.
- Any related judgement against you or any debt settlement agreements you entered with lenders. Bankruptcy, court payment orders and collection agency actions will be shown and detrimental to your history.
- Not Having Any Traceable History Doesn’t Help
Living under the radar doesn’t mean that you are clean. If the agencies cannot detect enough activities they cannot give you high scores. You need to be paying bills, seen living in certain addresses that is conferrable. Address is used as confirmation that makes information reliable. Therefore it is pretty important that you don’t keep moving too often.
- It Isn’t Bad to Get Credit
It is helpful unless borrowing is beyond means and appear to be struggling with it. That means that lenders are happy to extend it. Getting a visa or mastercard is fine and actually helps you. In time the limits will be increased that will help you further. The longer you keep a card the better as well. If you have a card with a $20,000 limit but you are paying the outstanding balance every month the story checks out and looks good.
Having the borrowing facility but not using them will help you achieve top scores. Debt Ratio is important and therefore you should try to increase card limits. On the other hand, maxing the cards is bad news.
- Having Too Many Loans and Cards Can Be Detrimental
If you have various sources of debt you may be seen as serial borrower. And the ability to manage them can be questioned. Anything that is out of ordinary will be picked up. Some lenders may actually ask you to pay off certain loans before they can lend more or ask to use some of it to clear old ones.
Having different lines is usually fine. For example, having a mortgage, car loan and couple of cards looks healthy as long as you never miss a payment.
- Too Many Credit Checks Is Not Ideal
Each time an agency pulls (requests) the record you lose points. Therefore, you shouldn’t keep applying for more. If you failed with one you should give it a little time before applying to another one. In addition, opening too many new lines of debt in a short time is a bad sign.
It is important to note that credit checks carried out by insurance companies are considered soft pulls and don’t cost you points. So, you can get as many quotes as you like without worrying at all.
- You Can Manage Your Credit Score
If you know what is included in the calculations you have a better chance of controlling, even manipulating it. You need to feed them the right sort of information and let them have solid confirmation. For example, it is great if they can confirm the address through government agencies like electoral roles. You should make sure it appears there.
You can manage finances even when you cannot. You can talk to utilities and card companies or banks and get the due dates on payments extended. Most of them will be obliged with this request especially if you are an established customer.
- How to Keep the Score High If You Have Variable Income
It is essential for people with variable income to have sufficient spare funds to manage their finances. Depending on how variable the income you should have sufficient savings to cover 3-6 month worth of living expenses.
You should also make sure that living expenses are manageable. You shouldn’t calculate earnings on a good month bases but on a bad month. This will allow you to keep the rent and other essential expenses low.
It is all about paying bills in time and not getting into too much debt. With sufficient savings and manageable living expenses you are unlikely to run into money problem.
- Establish History
Second part of it is about establishing a trail and reliable base. Being registered on a voting role and establishing an address are some of the other factors that can help you. So, having own place where you pay the utilities bills can help you, rather than renting a room in someone else’s house or sharing it with too many people.
10. Establish a Long Money Trail
Having a good money trail is healthy. Open a bank account and keep it as long as you can, instead of keep closing one and opening another. The same applies to cards as ages of the accounts matter. The older it is the better because the trail is longer. They want to see an established and healthy money trail.
It is clear that credit history affects car insurance rates. You probably agree that the above tips aren’t hard to follow. Motorists may have to spend thousands of dollars for premiums, especially after accidents and tickets. Turning a problematic record to good credit that is advantageous can be seen as one of the ways to economize on premiums. The good news is that you can achieve this change within only few months. On the other hand, auto insurance rates take 3 years to recover after an accident, as long as you don’t have another accident in the meantime.