Compare Rates From Top Providers
Save Up To 46% on Car Insurance
Enter Zip Code:

Get Cheaper Car Insurance By Improving Your Credit Score

Written by Todd Clay. Posted in Research Last Updated: 05/18/2009

Three Steps to Improve Your Credit And Pay Less for Auto Insurance

How your credit will affect your car insurance rates.

How your credit will affect your car insurance rates.

All of us want to pay less for car insurance.  Sometimes it feels like we are pouring hundreds of dollars down the drain, especially when we go for years without making a claim.  So it makes sense to do everything you can to cut car insurance costs.

But there may be one thing you haven’t considered.

Many consumers cut costs by raising deductibles on comprehensive and collision coverage. Some may even eliminate collision coverage for an older car altogether.

Improve Your Credit For Cheaper Rates

Yet a less obvious way to get cheaper car insurance is to improve your credit score. Yes, that annoying number you see when you check your credit haunts you enough. But the reality is that it usually impacts your car insurance costs, too!

Your credit report reflects who you are.

In addition to showing your credit and payment habits, it has transformed into much more.  Your credit report now shows additional items, like where you work, how much you earn, how long you have worked in your present job, tax liens or judgments against you, and other things – information not seemingly related to your bill payment history.

Insurance Companies Use Credit To Determine Rates

As a result, many car insurance companies have jumped on this information.

Car insurance companies now have statistical evidence proving that people with lower credit scores make more claims. Insurers have convinced themselves that this statistic-while not true for every single driver-applies to a lot of people. In industry lingo, it’s called actuarial data.

But what does this mean to you?  Simple: If you have a low credit score, a car insurance company will infer a higher likelihood of making claims and, thus, charge you a higher premium.

Three Steps To Improve Your Credit

The best thing you can do is improve your credit score.  You should already be monitoring your credit and behave in such a way to maximize that number. But this insurance revelation should provide even more motivation for having a good credit score.

Here’s three steps to take to improve your credit and lower your auto insurance:

1) Get a copy of your credit report every year. Examine it carefully to make sure all the information is true and accurate.

2) Don’t assume that, even if you haven’t missed any credit card payments, your credit report will be fine. Many credit reports contain errors – some even report incidents for other people entirely. That’s why it’s important to check yours periodically.

3) Act in a way to keep your credit clean.

By taking these steps to improve your credit score, you’ll improve your chances of getting better financing on your house or car. In time, you should also pay less for your car insurance.

Trackback from your site.

Todd Clay

Todd Clay is a former insurance agent with the largest insurance company in the United States. He earned his Bachelor’s from the University of Texas. He’s worked in several fields but has specialized in insurance, financial-related information, and technology. He blogs at Car Insurance Guidebook.

Connect with Tood on
Google+

Leave a comment

Overall Rating
Price
Service
Claims

Save Up To 46% on Car Insurance
Enter Zip Code: