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Get What You Pay For: Car Insurance Differences By Credit Score

Your credit score is one of the most important numbers in your life. It dictates how much you will pay for car insurance, and can even affect your ability to get a loan. A recent study by Forbes showed that people with poor credit can expect to pay more than twice as much for car insurance as those with good credit. This is a huge difference and should prompt people with low credit scores to take action. There’s much to discuss when it comes to the factors that go into determining auto insurance rates. There are also plenty of ways to improve your score.

Payment History

Payment history includes whether you have made late payments, had accounts sent to collections, or filed for bankruptcy. As you can imagine, these items will have a negative impact on your score. Insurance companies view this information as an indication of how likely you are to file a claim. If you have a history of filing claims, you may have higher rates.

A bad history may prompt an insurance company to refuse to provide coverage or charge a much higher premium.

Credit Utilization

Your credit utilization is the amount of debt you have compared to your credit limit. It’s important to keep this number low, as it shows that you’re not maxing out your cards and using all of your available credit. Insurance companies view high credit utilization as a red flag, as it indicates that you might be more likely to file a claim.

If you have a high credit utilization, you can try to negotiate with your creditors for a higher limit. You can also work on paying down your balances to get this number down.

Credit Inquiries

Every time you apply for a new credit card or loan, an inquiry is made on your report. This can temporarily lower your score. Insurance companies see these inquiries as a sign that you might be taking on more debt than you can handle. If you have a lot of inquiries, it’s best to wait a few months before applying for insurance.

These are a few of the factors on your credit report that may prompt an insurance company to quote you higher rates or refuse to provide you with coverage.

Improve Your Score: Pay Down Debt

If you have a low credit score, there are steps you can take to improve it. One of the best things you can do is pay down your debt. This will lower your credit utilization and show creditors that you’re serious about paying off what you owe. You should also make sure to pay all of your bills on time. This includes any loans, credit cards, or other monthly payments. Even one late payment can hurt your score.

Improve Your Score: Avoid Multiple Inquiries

Inquiries can temporarily lower your score. If you’re shopping around for a new loan or credit card, try to do it within a short period of time. This way, the inquiries will be grouped together and won’t have as big of an impact on your score.

Improve Your Score: Get Things Removed From Your Report

If you have items on your credit report that are inaccurate, you can dispute them. You should also try to get any negative items removed. This can be anything from late payments to bankruptcies. If you can get these items removed, it will help improve your score.

Improve Your Score: Maintain Older Accounts and Deal With Late Payments

As you work on improving your score, it’s important to keep up with your older accounts. If you have any accounts that are in good standing, make sure to keep them that way. If you have an older credit age, it shows that you’re a responsible borrower.

It’s also important to deal with any late payments. If you have any late payments, you should try to get them removed from your report. You can do this by contacting the creditor and asking them to remove the late payment.

This can be a difficult task, but it’s important to show creditors that you’re serious about fixing your credit.

Improve Your Score: Consolidate Debt

If you have a lot of debt, you may want to consider consolidating it. This can be done by taking out a new loan and using it to pay off your existing debts. This will help you lower your credit utilization and make it easier to keep up with your payments.

Consolidating your debt can be a good way to improve your score. However, it’s important to make sure that you don’t take on more debt than you can handle. You should also make sure that you shop around for the best rates on consolidation loans.

These are some of the steps you can take to improve your credit score. By following these tips, you can show creditors that you’re serious about fixing your credit and getting better rates on insurance.

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