Credit score and car insurance rate

Friday, October 12, 2012

It is no secret that car insurance is a complex issue. Often times agencies offer online quotes expecting their consumers to know certain terminology and elements of insurance calculation. Realistically, most of us aren't complete experts on insurance and do our best with the information provided when purchasing insurance. However, there is often one element to the insurance calculation that most people overlook: credit score.

That's right your credit score is used by almost every insurance agency in the U.S. If your premium is higher than you'd like it to be you should consider ordering your credit report from annualcreditreport.com and checking for any errors or negative items.

Low credit scores can ultimately mean higher insurance premiums. So lets talk about some ways to check and fix those errors to decrease your monthly insurance rate.

Order your credit report and credit score

The first step to change is becoming familiar with what's on your credit report. Every American is entitled to their credit report from the 3 major bureaus once a year. Take advantage of that great opportunity and order the report.

Check for errors

Did you know that 79% of credit reports contain errors on them? These errors range from wrong address information to incorrect account information. These types of errors play a role in your credit score and can adversely affect your insurance rates. Carefully go through your report and make sure your personal information is up-to-date and your account information is correct.

Avoid charge-offs on

Charge-offs are the worst thing you can have on your credit report. If a creditor is unable to collect payment after a certain period of time (typically 180 days), they will “charge it off” so they can write the debt off as a loss against their income taxes. This significantly hurts your credit score. If you do have a charge-off on your account make sure to contact your bank or credit institution to talk about ways to remove and reconcile it on your report.

Debt to credit ratio

You should never charge more than 30% of your credit limit. In simple terms, if you have a $1000 max on a credit card, do not spend more than $300.

These simple tips will help you improve and correct your credit score leading to better insurance rates. The easiest thing to do is order your credit report and review it. A cheaper insurance rate is in your hands, take advantage of this opportunity.

If you ever have questions you can always connect to the best network of Cheap Insurance agents by clicking here and filling out the form.

email

« Return to Blog