Whether it’s due to medical bills, job loss, family circumstances, or just plain poor judgment, once your credit score drops, it can be tough to find your way back to a healthy financial situation. I was there and I know it takes way more time than you want. When I was finally in a position to own a car again, I worried about how my credit would impact the cost of my insurance.
Cross that insurance myth off the list
In most states, your insurance credit score can impact the cost of your individual auto insurance. As of 2014, there are three states where this isn’t allowed. When I received my quote, I was happy to see it was actually lower than what I’d paid 10 years ago. In MA, HI, and CA, companies aren’t allowed to penalize customers for bad credit. Yay for us. But if you live in a different state it helps to understand your insurance credit score.
Why does it impact my insurance cost?
Studies show that people with higher credit scores get into fewer accidents. Therefore, if your score is low, you have greater odds of getting into an accident. Insurance companies use these statistics to make a decision (also taking into account your employment history, income, make/model of your car, etc) on your pricing, and in some cases, whether to provide insurance to you at all. Even a lack of credit history, can have a negative impact on your insurance costs.
What Can You Do About It?
- Work on improving your credit score. Websites like creditkarma.com provide the tools to monitor your progress, and educate you in ways to improve your credit.
- Monitor your score and get your insurance requoted when things improve. You can obtain one free credit report from each credit bureau once every 12 months. Order them all at once or individually at freecreditreport.com. You’re also able to obtain a free copy whenever you are denied credit, insurance or employment based on information included in your credit report.
- Bundle your auto insurance with homeowners insurance. While both insurance premiums can go up due to your credit history, bundling together can save you money.
- Check with your provider for discounts. Discounts are given to alumni of certain schools, employees of certain companies, etc. It never hurts to ask.
- Finally, let them know you’re want to reduce your monthly cost. They may be able to show you ways to reduce costs.
As with most things financial, stay informed, monitor your personal situation, and keep an eye out for opportunities that can result in savings for you and your family!
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