When you purchase a new policy, an insurance carrier will look at several factors as underwriting tools. One of those is your credit score. Because studies have shown a correlation between a good financial history and a diminished potential for loss, the majority of carriers will consider your credit score. Determining any applicant’s policy is based on risk, and lower risk applicants get better rates.
While some may see the usage of a credit score as a discriminatory measurement, credit scores are one of the more objective parts of the application process. A carrier will look also at your age, gender, driving record and education to create your policy. Furthermore, a credit score will not indicate your race, religion or sexual orientation. While it will also not indicate your occupation, salary or marital status, an insurance carrier may require this information to help determine the appropriate cost.
Your credit score includes basic identification as well as your financial history and matters of public record, such as bankruptcies, foreclosures or wage garnishments. Factors like late payments or length of credit history can impact an insurance quote. Some factors are positive while others will adversely affect the quote. A good credit score allows a person with a secure financial history the opportunity to secure the best rates and also encourages competition among carriers, which drives down the overall cost of insurance.
For those with a low credit score, there are several ways to improve it so that you can get cheap auto insurance rates, according to cheapcarinsurance.net. Most importantly, make all payments on time. Late payments will drag your score down and will also make you an unattractive option to a financial institution. Because insurance companies are assuming the risk of their customers, they will charge less to applicants who show responsibility. Some improvements to your score cannot be made overnight. Part of having a high credit score is having a long credit history, which will only come with time.
For those starting out driving, a low-limit credit card can be a good way to begin building a positive credit history. Use the card only for small purchases like fuel, and pay the total amount off every month. Having a cell phone bill in your name is also a good way to begin building credit without much risk. As you get older, your driving record will help lower your rates, and when combined with your solid credit history, you will have access to more affordable car insurance.