While your credit score certainly impacts your ability to obtain a lower-interest loan, purchase a home, and the freedom make other large purchases, many individuals are surprised to learn that their credit scores also impact their ability to earn lower insurance premiums! As your credit score reveals your overall financial reliability, individuals with low credit scores are generally charged higher insurance rates. As an insurance company must ensure that they will receive their payments on time without any disruptions or delays, those with low credit scores are often at a disadvantage as they shop around for the best rates.
The Relationship Between Credit and Premiums
While each insurance policy type and company has its own fees and rates, most insurance programs allow for lower charges on higher credit scores due to the fact that a high credit score reveals a client who has proven his or her honesty, ability to pay bills in a timely manner, and overall financial responsibility.
Most notably, car insurance companies tend to alter one’s insurance costs in correlation with one’s credit score. In examining the relationship between, for example, car insurance and credit, insurance companies have discovered that individuals with lower credit are statistically more likely to be involved in an accident than individuals with higher credit. While there is no definitive explanation as to why lower credit drivers are statistically involved in more accidents some theorize that those with higher credit scores are potentially able to pay for minor damages out of pocket–without having to file an insurance claim. Ultimately, fewer anticipated accident claims leads to an overall drop in the cost of insurance coverage.
How to Boost Credit and Lower Premiums
If you’re striving to lower your higher insurance costs, one step involves boosting your overall credit score. Begin by ensuring that all of your payments are made on time to all of your creditors / accounts. Even one late bill can lead to a drop in your overall credit score! Adding to this, strive to establish and maintain long-term credit accounts. The longer an account is open, the more reliable you appear as a potential customer. This also means you should avoid opening too many promotional credit cards in order to receive a small discount-choose your credit accounts carefully!
Yet even with credit in mind, individuals desiring lower insurance rates should be aware that their overall credit score is just a fraction of what determines their insurance costs. Insurance providers also determine client costs by evaluating their driving history, tickets, traffic violations, and so forth. Ultimately, to save cash with decreased rates, ensure you’re carefully driving and carefully spending.
