Securing Car Insurance When Your Credit Is A Wreck
Auto insurance is a must-have when it comes to protecting yourself and your vehicle on the road. The highways can be dangerous, and even if you are a model citizen with not so much as a parking ticket on your record, you must be diligent of other drivers and varying state laws. You would think that your level of caution on the road would translate into a competitive auto insurance rate. But instead, your insurance company may look less toward your driving record and more toward that library fine you forgot to pay that has caused your three credit scores to tank.
Using your credit score ratings as a factor when setting your insurance rates is a practice that has been in use for several years by insurance companies. And while this practice is controversial and spawned several lawsuits, the reality is that it helps to have a good credit score. So what do you do if your rating is low? There are a few steps you can take to try to improve your chances of securing a better rate.
1. Know Your State’s Stance On Using Credit Scores To Set Rates
Not every state allows insurance companies to factor your credit score into your insurance rate assignment. For example, California, Hawaii and Massachusetts each have laws that prohibit companies from accessing your credit history when making insurance determinations, according to Insurance.com. Other states may have legislation in the works or lawsuits pending, so it’s helpful to know where your state stands and pay attention to potential changes.
It’s also important to note that not all companies factor in your credit score. When you are comparing different providers to determine which company offers the best services, ask what their policy is in regards to checking your credit history. This may play a role in your decision to go with one company over another.
2. Start Improving Your Score
Regardless of whether your insurance company leans on your credit history to assign rates, it’s still beneficial to have positive credit. Other agencies will access your history as well, including lenders, employers, landlords and, in some cases, utilities companies. For this reason, it’s time to start bumping up your rating if it may get you disqualified for opportunities.
The rules on how to obtain a good credit score never change:
• Pay your bills on time
• Keep your credit card balances low
• Avoid multiple applications for new credit
• Avoid closing old credit lines
These steps can help you begin rebuilding your score and strengthening your credit profile. If you have difficulties remembering when bills are due, set a notification or automate your payments through your bank.
3. Follow the Rules of the Road
It’s true that your credit score may play a role in your ability to secure a low insurance rate, but this is not the only factor companies weigh in. Traffic citations and reckless driving also play a role in your rate, making it even more important to avoid speeding or committing other infractions that may drive up your rates. In addition, you may have a better chance of securing a good rate if you take a defensive driving course, which demonstrates to companies that you take your good driving record seriously, suggests InsuranceNewsNet.com.
Car insurance is necessary for lowering your exposure to financial risk in the event of an auto accident. To qualify for competitive rates at top insurance companies, it’s important that you take the initiative to keep your credit scores and your driving record clean.