We all know that our credit scores and credit histories can affect our buying power: home loans, car loans, renting an apartment, or even buying a cell phone plan. But did you know that your credit score can affect the price of your car insurance premium?
Why Credit Scores?
Car insurance companies use credit scores as risk indicators—better credit, better driver, they say.
The Insurance Information Institute says that the average cost of a claim for a person with below average credit is 53% higher than average. For a person with above average credit, the average cost of a claim is 23% lower than average. So having a higher credit score means you should cost less to insure, and should get better car insurance rates.
Keep an Eye on Your Credit
To keep your credit in good standing, pay your bills on time, don’t obtain more credit than you need, and keep credit card balances low or pay them off each month if possible. It’s also a good idea to check your credit record often and make sure that any errors get fixed quickly. The Fair Credit Reporting Act (FCRA) requires each of the nationwide consumer reporting companies—Equifax, Experian, and TransUnion—provide you with a free copy of your credit report, at your request, once every 12 months.
Below Average Credit? You still Have Options!
If your credit score is lower than you’d like, don’t worry, there are alternatives to paying high car insurance rates. Your best bet is to shop around and compare car insurance quotes. The AskPatty Insurance Center is the perfect place to start comparing car insurance quotes. Hang in there, you’ve got options.
Gina M. Scott is a Web writer and blogger for InsWeb. She has worked as a Web writer and journalist for three years, covering a variety of topics such as technology, government, and cyber security, since graduating from Sacramento State University with a BA in English—professional and creative writing. She now specializes in auto, home, term life, health and other insurance topics for www.InsWeb.com. Born and raised in Northern California, Gina enjoys traveling and creative writing.
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