We all know that not having bad credit history is very detrimental and has a lot of disadvantages, in that you are curtailed many privileges you would otherwise be enjoying if not for the bad credit history. A person with bad credit history would be denied loans and be charged higher interest rates. Unfortunately, a person’s bad credit reputation supersedes his reputation in the auto insurance world.
Indeed, although credit and car insurance seem unrelated, they actually are, and they actually do affect each other. Just as utility bills a person needs to pay monthly, car insurance premiums are paid monthly. As such, the paid premiums will eventually be reflected in the credit report of a person. Once a driver misses out on paying the monthly coverage fee, it will show on the report as arrears or bad debt.
The question now is if having bad debt will make the driver lose his license. Is this actually possible? Well, it is possible that the driver’s driving privileges will be taken away from him, if the insurance company finds out that the person is in bad shape financially. Credit companies evaluate a person’s ability to pay and use this information as a basis on how much interest rates will be given to that person. In turn, auto insurance companies evaluate a person’s credit history and use this information as a basis on how much premiums to charge on the person. In fact, before a person will be granted an insurance policy, his credit reports and history will be first reviewed.
This is the companies’ safety precaution from people who might not have the ability to properly pay premiums on time. Ultimately, if the person fails to pay promptly, the company will drop him from the policy, and the person will then have it at odds with the law for not having insurance. Another similarly disadvantageous consequence would that be being charged higher premiums by the company. Of course, no one wants to pay expensively for something you could pay for at a lower price.
The most sensible thing to do in order to avoid falling into an unpleasant situation with your insurance company is to pay your bills on time. If it happens that there are some shady areas in your report, better straighten it out with your credit company and the bureaus.