You should check your credit report to see if your zip code could affect your auto insurance rates.
InsuranceQuotes.com reports that drivers with poor credit scores pay twice as much, 91 percent more than those with good credit. Average credit pays 24 percent more.
Credit is only one factor that affects your auto insurance rates. Rates will also be affected by where you live, how you drive, your driving record, gender, and age. According to InsuranceQuotes.com research, a poor credit score can cause a significant increase in your rates in most states if you keep those other factors constant. Insurers are prohibited from taking credit scores into account when setting auto insurance premiums in three states, Hawaii, California, and Massachusetts. Insurance quote geico
InsuranceQuotes.com asked Quadrant Information Systems for data from six large carriers across all 50 states to determine the impact of credit scores on average rates. Three states do not consider credit as a factor in determining the rate increase you would experience if your credit score is low. According to InsuranceQuotes.com, the average cost for a bad credit score in those states is 116 percent.
How can your credit score have such an impact on your auto insurance rates? It needs to be clarified why. People with bad credit tend to drive recklessly or cannot pay the small claims that another driver may make. There’s also a possibility that you are meticulous about your credit and your car. Make sure to lock it in a garage, so it is less likely to be stolen. Insurance companies know that lousy credit statistics lead to higher claims. Higher rates are a result of more shares.
Credit is easy to manage, which is a bright side. Even though banks use slightly different credit scores, insurers are almost identical in determining if you have a good or bad score. Your credit score can help you get lower insurance rates and reduce your borrowing costs. It can also make it easier to find a job. Employers will also consider your credit history when evaluating applicants for work.
“When you consider all the factors that influence car insurance rates, credit is one of the easiest things to control,” Laura Adams, Senior Insurance Analyst at InsuranceQuotes.com, says.
What should you do?
Make your payments on time: It’s obvious. According to FICO, the largest credit scoring company in the country, paying your bills on time every time has the most significant impact on your credit score. It accounts for around 35 percent of your final credit score.
Age: While it may seem unfair for a youngster to have higher insurance rates due to their lower driving record, credit scores will improve the more you manage credit responsibly. Young people may consider becoming “authorized users” of their parents’ credit card accounts. This will give you a better credit history than what you could build on your own. Fair enough, your parents will likely be responsible for their credit. Your score is approximately 15% based on the length of your credit history.
Use credit sparingly. The credit score, about 30% of your credit score, measures how much credit you have and how much credit you have available for revolving credit lines like credit cards. If you have ten credit cards with $1,000 limits each, you will have a $10,000 total credit. Your credit score will plummet if you exceed the limit on all your cards. Use 10 percent to 10% of your credit.
Manage your accounts. The remaining 20 percent of your score measures the number of different credit types you have, such as credit cards, student debt, and mortgages. The better your credit management skills are, the more you can manage. How much credit have you applied for? Your credit score will be affected if you are always looking for loans. You can add accounts as needed, but be careful about new credit requests.
Review your credit report. Sometimes, a low score is not your fault. An identity thief might have stolen your information and applied for credit in your name.