Credit score to many consumers, is a tool to get mortgage loans at reasonable rates. However, not many people know that credit scores can also impact auto insurance premium. In general, the higher your credit score is, the lower your auto insurance premium.
Credit score encompasses almost all facets of your financial life. It is thus important to maintain a good credit score since it can open doors of opportunities for you to make your life easier and more convenient.
Auto insurance companies look at credit scores when they’re computing for insurance premiums. This practice has been opposed by many consumers who don’t see any relevance or connection to a person’s driving habits and his credit score. Legislators are also up in arms against insurers using credit scores to compute for an individual’s insurance fees. Early this year, some lawmakers proposed bills to put a stop to this prevailing custom. Unfortunately their efforts have failed to make any headway.
With no laws prohibiting them, auto insurers are free to continue using credit scores as basis. So until lawmakers make any definite strides against this practice, consumers need to be vigilant and guard their credit scores.
FICO score is the numerical measure of one’s credit standing. These scores give banks and insurers a glimpse as to how well you manage your finances. Missed payments, overdue bills, and exceeding credit limits will drag your FICO score down. If you owe a lender or lenders a significant amount of money your FICO score will surely get hit. If you’re late with your payments or you fail to pay your monthly bill your FICO score will also suffer.
When your FICO score hovers at dangerously low levels, doors of opportunity would be shut. Banks would view you as high risk and may not extend you a loan to allow you to purchase big ticket items such as cars or houses. Banks may turn down your credit card application. Auto insurance companies may give you auto coverage but at exorbitant interest rates.
When your FICO score is low, you need to take appropriate and immediate action. A good indicator that you need to repair your credit is when your credit score falls below 620. One of the things that you can do to bring your score up to respectable levels is to pay your bills on time and to never be late with payments. Another important step that you can do is pay off your revolving debt. In addition, order free copies of your credit report from the three major credit bureaus, namely TransUnion, Equifax, and Experian. Check for inconsistencies in the entries. In cases where you do find errors, inform right away your bank and the concerned credit bureau so that they could take appropriate steps to address the issue.
Credit repair maybe a tedious job, but it will pay off handsome dividends in the end.