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How Your Credit Effects The Cost of Your Auto Insurance Policy

Did you know that even if you have a spotless driving record that you can still wind up paying more for auto insurance coverage than someone with a poor driving history? How? Most auto insurance carriers are going to label you high-risk if you have a poor credit history. Having bad credit may not only effect the cost of your policy, it may influence the decision of whether or not a policy should even be issued for your vehicle.

Ironically, an individual with a blemished driving history but a good credit history can pay a smaller amount for auto insurance than someone with a great driving record, but a poor credit history.

How much more can I expect to pay for my insurance policy if I have bad credit?
Typically, a policy for someone with poor credit is going to cost 15-45% more than the cost of a policy for a person with good credit.

What if I have good credit?
If you credit score is very strong, you can land low rates. A good idea would be to shop around and see what the best rate you can get would be.

How do auto insurance carriers determine my insurance score?
Each insurance company has there own method of coming up with their own formula, based on one or several different numbers, for calculating your auto insurance score. Insurance companies will either formulate an insurance score based on credit information obtained from one of the three major credit reporting companies, or from information directly received from your FICO score.

What is the difference between my auto insurance score and my actual credit report score?
Carriers do not look at the information on your credit report.
They are not concerned with how long you have had credit, how many accounts you have, how much unsecured debt you have, how many times you have been delinquent, etc.. There are merely interested in what your credit score is.

Is there anything I should do before I purchase auto insurance?
Similar as to when you apply for a car loan, you should obtain a copy of your credit report. You want to make sure all of the information is accurate and up to date.

Is there a way that I can obtain a copy of my auto insurance score?
Unfortunately, no. As mentioned, every insurance company is going to have a different means of how they formulate your auto insurance score and can not be ordered like credit report.

I am looking to get a new policy. How will my credit effect the new policy?
Auto insurance companies will not recalculate your auto insurance score once you become a policy holder. So, if your credit has declined since you purchased the policy,
you may be better off keeping your current policy.

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