Boost Credit 101 Reveals Factors that Determine Auto Insurance Rates

The three-digit figure that shows how creditworthy you are, also known as your credit score, has some influence on how much you pay for your car insurance. A credit score gives lenders a picture of their financial behaviour and gives them an idea of whether they can handle a loan and settle bills on time.

Most insurers use the credit score in their underwriting process. However, it is worth noting that the scores that insurers use are quite different from those that lenders use to extend you credit. They use the data in your credit report to come up with an insurance score whose main goal is to predict the likelihood of a customer making an insurance claim in the future.

The controversy of the use of credit score in auto insurance rates

The use of credit score in calculating car insurance rates faces some fundamental issues. Many consumers and other parties seem not to understand the connection between the timely payment of bills and safe driving. Even lawmakers find it hard to explain the concept. For this reason, the use of credit score in determining car insurance rates is prohibited in some states such as California, Hawaii, and Massachusetts. In most states, though, it is legal.

Due to the critical part that credit score plays in determining auto insurance rates, it would be advisable for the consumer to learn how to boost a credit score so that they can reap the benefits of having good scores.

Factors that determine a car insurance rate

Some factors greatly influence the probable risk that an insurer assumes when they insure a car. Some of the factors include:
? Your driving record
? The tasks you put your vehicle through
? Make and model of your automobile
? Your history of driving and claims
? Geographic location
? Credit history

Credit score as a determinant of auto insurance rates

Insurance companies are only keen on factors that are linked to possible car insurance claim losses. The insurers or agencies that compute credit-based insurance score are interested in certain things in the credit report, including the length of credit history, outstanding debt, utilization ratio, payment history, the number and types of credit accounts, new applications for loans, and so on.

Did you know your credit score could be costing you a significant amount to the tune of thousands of dollars in auto insurance rates? You could save up to $1,000 per year on your car insurance by improving your credit score by even 100 points. The amount you can save depends on the insurance company and your score. For instance, those with a poor score pay up to 40% more than those with better scores. It is also observed that an improvement from a fair score to a good score could result in savings of about 17% while insuring with major companies.

Conclusion

Your credit score plays a significant part in arriving at the insurance rates for a car. Those who wish to get good rates for their cars need to work on improving their score unless they live in any of the three states that have banned the use of credit scores in insurance rate computing. All the same, a good credit history and score have many benefits besides getting a favorable auto insurance rate, so improving it is worth the effort.

Company :- Boost Credit 101

User :- Tegan Wehner

Email :-tegan.wehner@gmail.com