While many motorists know the typical culprits of a high auto insurance rate - checkered driving records, supercharged motors, vehicle age - few know of the close link between a driver's credit score and the cost of coverage premiums. A recent report from Kathy Kristof of CBS MoneyWatch revealed that having a bad credit score can wreak havoc on auto insurance rates, and in many instances double them. The CBS report refers to a study conducted by InsuranceQuotes.com, which confirms that a good credit score is key to keeping rates low.
"Considering all of the factors that go into car insurance rates, credit is actually one of the easiest to control," Laura Adams, senior insurance analyst at InsuranceQuotes.com told the news source. MoneyWatch provides a set of tips for drivers who are looking to decrease their auto insurance rates by improving their credit scores. The report suggests that young drivers start early to ensure good credit down the road, borrow 10 percent or less of their credit limit, always make payments on time, and be sure to check reports at the end of each month to make sure they are accurate.
Of course, maintaining a good credit score has numerous benefits, but reduced auto insurance rates are a powerful reminder to be responsible when it comes to credit cards. According to the InsuranceQuotes study, drivers with bad credit pay an average 91 percent more than those with good scores, and pay 24 percent more than those with average ones. Drivers who fail to improve their credit scores will find themselves in financial straits from banks and insurance companies alike as the two expenses compound one another.
Was it always this way?
Linking credit scores and auto insurance rates was not always the norm for insurers - the practice has become more popular as the two factors begin to show a close correlation. Moneywatch reminds drivers that insurance companies are aware that bad credit tends to lead to a higher incidence of claims, which in turn means higher rates.
With this evidence in hand, fewer companies are allowing those with bad credit to get away with cheap rates. According to a recent report from KETK NBC, this industry trend has been around no longer than 20 years. Nowadays it is standard procedure for insurance companies across the country.
"In the past, maybe half would do it, half would not do it," Tom Sorrells of Tom Sorrells Insurance told the news source. “Now we’re starting to see some of the minor league players, some of your little regional carriers, saying, 'Hey, we can do credit score, too.'”