Why Bad Credit Might Affect Your Car Insurance Rates
Your insurer expects you to pay for your car insurance policy. If you don’t, that usually gives them the right to suspend your coverage. Many insurers will take a good look at your reliability to pay when you sign up for coverage.
Insurance companies weigh a lot of factors when determining how much you pay. One of these is often your credit score. Many drivers are surprised to learn that their credit score might affect their policy premiums. Drivers with poor credit often end up paying more for their policies.
Poor Credit And Premiums
Most car insurers base premiums on how much risk an insured party might pose to the company. A driver’s risk is essentially an estimate of how likely they to might file a claim. Drivers with the lowest risk levels often pay the lowest policy prices. By contrast, drivers with higher risks often cost more money to insure.
For example, if you have had a lot of car accidents, that means you might make a lot more claims. This might force the insurance company to pay you more frequently. Therefore, the insurer might have to charge you more, because you are more of a drain on its financial resources.
So, how does bad credit affect car insurance rates?
If you have bad credit, it can signal that you might have a hard time paying bills and staying out of debt. This might indicate your insurer that you’re more likely to fall behind on your payments. Most insurers don’t want to offer policies to unreliable customers, as they take a financial hit when they don’t receive premium payments. Therefore, low credit might disqualify you from coverage.
Another idea to think about is what bad credit means following an accident. Research has shown that those who have poor credit could be more accident prone. As such, these drivers might pose an additional risk to insure.
Improving Your Credit
Your credit history isn’t the only factor that will determine your policy premiums. However, it’s one factor that you are able to control. If you improve your credit, you might be able to decrease the premium you wind up paying.
Work hard to maintain good credit standing. Pay off your debt, and don’t carry too many lines of credit. Check your credit score annually, and talk to your financial advisor on ways to improve your spending habits. With a little attention, you can soon be well on your way to a secure financial future.
Got question about auto insurance coverage? Contact ACF Insurance today! Our agents are happy to help!