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Learning About Car Insurance

Hello, my name is Cliff Bolton. Welcome to my site about vehicle insurance. I wanted to learn all I could about insurance before I started driving to go into the decision-making process with ease. Once I started exploring the insurance industry, however, I could not stop reading. I learned all I needed to know to obtain car insurance and much, much more. I created this site to share this knowledge with my readers. I hope to help others tackle this important decision without worry. Please feel free to drop by daily to learn new information about this important topic. Thank you for visiting my site.


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Learning About Car Insurance

How Your Credit Affects Your Auto Insurance Premiums

by June Peterson

Whether you apply for a credit card, seek financing for a new car or qualify for a home loan, your credit history will play a deciding factor in your being approved or denied. Believe it or not, it can also affect how much you'll end up paying for auto insurance. The following takes a look at how your credit score and credit history can affect your auto insurance rates.

Creditworthiness as a Measure of Risk

Nearly every auto insurance provider looks at your driving history, claims history and numerous other factors when determining your auto insurance rates. What you probably don't know is that they also look at your credit. For insurers, your credit history can say volumes about your ability to repay debts and your likelihood of missing payments or defaulting on financial agreements. Auto insurance providers rely on this information, along with other important factors, to assess the risk you represent to the provider and determine how much you'll pay for your insurance.

In addition to using your credit score, your auto insurance provider may also utilize credit-based insurance scores to determine your overall risk. These scores are also based on certain information gained from your credit reports, but they don't include your income history, gender or current job status.

Bad Credit Could Mean Higher Premiums

Poor credit can do more than make buying a car or purchasing a house more difficult and more expensive. It can also drastically increase your insurance rates. In Alabama, for instance, drivers with poor credit pay an average of $2,555 for their new-customer premiums, whereas drivers with excellent credit pay an average of $1,081, according to Consumer Reports.

The better your credit, the lower the rates you'll likely pay for your auto insurance coverage. Even a minor bump in your credit score from a good score (670 to 739) to an excellent score (740 and above) can help you save an average of $214.

Exceptions to the Rule

Not every state allows auto insurance providers to base your premiums on your creditworthiness. California and Massachusetts are two states that prohibit insurers from using credit histories and credit scores to determine a driver's insurance risk. Instead, insurers must rely on traditional factors when assessing risk, such as the driver's age, income, marital status and driving record.

If you live in a state without these protections, the best thing you can do is monitor your credit reports and dispute any incorrect information that turns up on your report. Avoiding late payments and keeping your credit card balances low can also help improve your chances of getting affordable auto insurance.