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Low credit score means high insurance premiums
Most of us are aware that lenders check our credit and consider
our credit score but more and more insurance companies are doing
it as well. Insurance companies tend to assume that a bad credit
report may also indicate that youre a bad driver.
According to Esurance Over 90% of U.S. Insurance companies, including
Esurance, use credit-based insurance scores to establish eligibility
for payment plans and to help determine insurance rates. (In case
youre wondering, credit-based insurance scores predict how
likely youll pay your bills in the future.) Actuaries and
research analysts have found that the scores help predict your accident
potential. If you have a high credit score, you can generally expect
lower auto insurance rates than someone with a low credit score.
People with bad credit pay up to 50% more for car insurance! Thats
nothing new however, as insurance underwriting has been using credit
scoring to determine rates for some time. On the flip side, people
with good credit are going to benefit from lower premiums. Thats
great news for the percentage that have good credit but considering
that almost 70%
of credit reports contain errors, even those who think they
have good credit may not.
Do it yourself credit repair
and an annual audit is definitely worth your time whether you have
good credit or not. Since one out of four credit reports contain
errors, you may be paying more than you should, regardless.
Hiring a credit repair company may not be a wise investment for
a few minor blemishes. In that instance, do it yourself credit repair
is financially beneficial. Its cheaper and it makes more sense
if youre just questioning a few items. Paying up to 39.00
a month wont make much sense for a few blemishes. Your trying to
lower your car insurance premium so another monthly expense makes
little sense.
The DIY method can payoff big and could cut your car insurance
rate by up to 50%. Thats a substantial savings worth your
time By taking a look at your credit reports, you can identify any
potential issues that may affect your credit history.
Its not clear whether the insurance company you are with
uses a FICO credit header or a different type of score but the bottom
line is, they are interested in your credit score and not how much
debt you have or home loans outstanding. They care about overall
credit history and the score gives them that.
Many people feel that using a credit score to determine car insurance
rates is discrimination because people with low income or prior
credit issues are targeted for the higher premiums. The jury seems
to still be out on whether the insurance industry will come up with
something more fair and balanced for all.
It just goes to show that taking care of your credit is becoming
more important and affecting more aspects of your overall financial
health. Its a task worthy of undertaking to save some money.
If you havent taken a look a t your credit in at least a year,
you need to review all three credit reports to make sure they are
in deed accurate. If you do have bad credit, take DIY steps now
to remedy those issues and hopefully lower your car insurance premiums.
Be sure to get at least three insurance quotes before you settle
on one. Ask the insurance company if they use your credit to determine
what rate youll pay. You can also find out more about your
state insurance laws at http://www.iii.org/media/companies/state_org/insur_departments/
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