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December 09, 2015

Your Credit Score Can Affect Your Insurance Rates

Credit_scores_affect_insurance_rates-iStock_000016393980-Lightstar59In recent years, an applicant's credit score has grown in importance for determining car insurance prices. Every agency now asks for credit scores before determining coverage rates. According to Lower-Auto-Insurance.com, brokers and financial analysts have noticed that credit rating has a growing influence on auto insurance prices.

The changes may have been caused by the recent financial crisis, when many auto insurance policies lapsed. To avoid financial losses, agencies may now decide how much to charge someone based on his or her credit score. Someone who has a good credit rating may get cheaper insurance premiums, as the agency believes that clients who have a good financial situation will be better able to cover their premium expenses.

Credit_scores_affect_insurance_rates-iStock_000048475246-RonFullHDOn the other hand, a bad credit score and a high amount of debt makes the applicant look like an unreliable client, one that at a certain point may be likelier to stop paying for coverage. Thus, the agency chooses to increase premiums to make up for any potential losses.

"Your credit rating can determine how much you have to pay for vehicle coverage." said Russell Rabichev, Marketing Director of Internet Marketing Company.

To give additional evidence of the importance of a good credit rating, the article shares study results published by Consumer Reports in the September 2015 issue. One study reached an alarming conclusion for drivers who have a bad credit score: "Our single drivers who had merely good scores paid $68 to $526 more per year, on average, than similar drivers with the best scores, depending on the state they called home," said Consumer Reports. 

Credit scores have begun to play a role in determining coverage premiums since 2006, but very few agencies advertise this. And the article shows that few clients know that their premiums may be determined by their financial situation.

In order to keep auto insurance prices low, brokers recommend clients to compare quotes at a site like Lower-auto-insurance.com, where in just a few minutes, every driver will be able to compare multiple quotes from various agencies in every state.

 

 


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