When you think about what is taken into consideration when the insurance company is calculates your rates, usually the cars make and model, your driving record and your age and gender are what you think.
But believe it or not, there is more that is considered. Your credit score can affect your rate, and a bad score can lead to increased rates. But working to improve your credit score can help, and Cash 4 Cars Cincinnati wants to bring you the facts, so you can make an educated and fair decision.
According to edmunds.com article, Does Your Credit Score Affect Your Car Insurance Rate?, “where you park your car at night, your gender, your age and the kind of car you drive. Also relevant to your rate, according to insurance companies, is your credit score.”
The article goes on to state:
“Of course, when the 2008 financial crisis hit, many people developed worse credit scores that had nothing to do with their sloppiness,” he said.
“The fact is that credit is a surrogate for prohibited rate classes such as income and race,” Hunter said. “Insurers are prohibited from using these factors in all states and we think this is their way around the prohibition.”
But others argue that insurance is a numbers game and the practice, even if unfair, might be logical. Frankie Kuo, an analyst at ValuePenguin.com, says that insurers are “doing their best to find out whether their future and current policyholders are a good or bad risk to take.”
This being said, there is still options for those with bad credit.
“Regardless of whether the use of credit history is fair, it is legal in all but three states. So what can you do if your credit score is in less than perfect shape? As always, your best bet is to shop around for an insurance company.
“Insurers always differ in how much weight they put on each rating factor, and I guarantee you consumers will always find one that finds their imperfect credit score less of a problem than other insurers do,” Kuo explains.
According to a study by WalletHub, Geico appears to rely the least on credit scores, while Farmers Insurance seems to lean on it the most heavily.
For consumers who have difficulty finding coverage at all, in almost every state there is an assigned risk plan that helps high-risk drivers find coverage for a limited period of time. “Even if the rates may be higher than if they obtain a policy in the voluntary market, they will be avoiding insurance lapse, which not only contributes to higher rates in the future, but also possibly legal consequences,” Kuo explained.
Finally, improve or maintain your credit history by paying your bills on time and not skipping payments. You also should check your credit report and keep an eye out for possible errors. Consider free credit monitoring with a company like CreditKarma and free annual credit-history reports from AnnualCreditReport.com.”
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