If you have ever tried to make a major purchase, rent an apartment, or get a loan, then you may already know that your credit score can greatly impact the results. Despite the importance of this rating, a 2015 report released by Lending Tree revealed that well over half of Americans do not know their credit score. However, what you may also not know is being ignorant of this information can be costly, especially when it comes to paying your car insurance premiums.
1. It Could Lower Your Insurance Score
Many car insurance companies review aspects of your credit history before offering you a premium. This is primarily because they want to gauge how responsible you are with your monthly bills, whether you pay ahead of time, on time, or late, and get an idea of your overall credit history. The information they pull creates what is known as an insurance score. This score can affect the kind of policy you are offered, so the higher your score is, the lower your premiums may be.
2. You May Have Fewer Premium Options
If you have a fair to poor credit score that negatively affects your insurance score, this may reduce the types of premiums those with higher scores may be offered by a given company. Because insurance companies look at factors such as payment history, outstanding debt, and recent credit requests, low scores or trouble in these areas could lead a company to offer you a limited or costly premium. If you plan to insure more than one vehicle, this could seriously impact your household budget.
3. You Might Enjoy Fewer Perks
Just as having a high credit score can give you a wide range of choices when buying a car, having a poor one can limit the number of discounts and perks your insurance company can offer. In fact, you may not even be able to insure your vehicle with the company of your choice if your score is too low because you might not be able to afford the premiums you qualify for. If you want to know more about discounts and how your credit score might affect them, contact your local insurance agent.
4. You May Have Limited Choices
Having a high credit score may allow you to have more control of how and when you pay your premiums. For example, some companies allow those who qualify the option to choose when their bill is due, whether they can make partial payments, and other choices that might make payments easier. The lower the credit score, the fewer choices you may have, depending on the information the company uses to compile your insurance score.
Your choices may also be limited when it comes to adding additional vehicles to your car insurance policy. Bundling options may come with certain conditions and limitations depending on premium costs and whether you qualify.
Not all insurance companies use the same information when creating your insurance score and depending on where you live, it may not be required at all. However, you should know as much as you can about your credit history and score before you shop for car insurance in order to find the best deal.