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Bad Credit Increases Insurance Cost
Most people understand that their credit score can affect their future chances for credit, but many people do not know that their credit score and credit records are also used by auto insurance and home insurance companies as one way to determine rates. Most states allow home and auto insurance companies to use credit information in their formulations for premium rates. Needless to say, if your credit history has some bad marks on it you may end up paying more for your coverage. To make matters worse, the Supreme Court of United States ruled this year that insurance companies do not even have to tell you that it was your credit history that caused them to charge you more. In brief, the court ruled, unanimously, that insurance companies were not at fault in charging certain poor-credit customers more in premiums without notifying them that they were doing so. What this means to consumers who have poor credit marks is that they will not know that their credit history is the reason they are paying more.
This is why it is imperative that consumers watch their reports on a regular basis and make corrections when needed. It would be nice if customers could simply ask their home or auto insurance company to explain how they determined rates but one should not expect to get an answer. The fact is most companies keep this a secret. What is not such a secret is that ninety percent of home and auto insurance carriers do use credit history as a part of their calculation on rates. Some companies put a lot of weight on past credit problems while others do not.
One way to try to circumvent this is to improve your credit score whenever you can. Here are some tips on how to do that. Pay your bills on time. Late payments show up on your credit report and they stay there for seven years. Try to get your revolving balances low. Home and auto insurance carriers examine at how much debt you have in relation to your available credit. Always keep your oldest credit card open. All insurers prefer to work with people who have well-established and long standing lines of credit. You may not know it, but sending in credit card applications can actually lower your score. With that in mind, avoid applying for several lines of credit at once.
Try to limit the number of credit cards that you have open. Keep your oldest one open, but close those that you do not use anymore. Having too many credit cards can lower your score. If you know you have some bad marks on your credit report and your rates have gone up, you may have no other choice but to shop for a new policy. The reason you may wish to do this is because there is no hard and fast rule as to high much higher rates must be for those with poor credit histories. One company, as mentioned above, may not charge you nearly as much as another company will. The only way to know is to shop.
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