Finding a car insurance policy can be no simple task.
There are several deciding factors that are considered when you approach an insurance company in the hopes of being approved, but one of the most important is your credit score.
This means that a variety of information about your financial history will be examined, ranging from how many accounts you have, whether you pay your bills on time, and whether you have outstanding debt, according to the Federal Trade Commission. Out of this research, they will provide you with a credit score, which the company believes will indicate whether you will repay the loan eventually and make the payments on time. Have you racked up monster bills on your Visa, and then forgot about paying the bill? Your credit score will take a hit.
Your first step should be to know your own credit score. A variety of websites out there will provide you with your credit score for free, like CreditKarma.com or FreeCreditReport.com. Next, check and see if your credit score is even evaluated where you live. When Elizabeth Bernard of Quincy, Mass. was in the process of buying a car, she found that her credit wasn’t investigated. That’s because Massachusetts, along with California and Hawaii, are forbidden from checking the credit scores for people seeking auto insurance quotes. However, Elizabeth did end up having to have her credit evaluated in order to get on a payment plan, instead of paying for the entire car up front, she said.
“They ran a credit check on me using the three bureaus. My credit was perfect on two but on one was really low. Two of my scores were over 800 and then the third was like 550 or something,” says Elizabeth. “Because there was such a big difference they assumed it was a mistake (which I found out later it was) and then they approved me for financing.”
Because of Elizabeth’s excellent score, getting approved for a payment plan was a simple task. If her credit score was lower, she most likely would have found a higher-priced insurance premium. The good news is that even if your credit isn’t all that spectacular, it can be improved with just a little bit of work.
In the long run, you can improve your score by making payments on time, and paying all fines as agreed with your credit card company. If you’re behind, keep working to catch up with payments, and refrain from using your card much more, the National Association of Insurance Commissions advises. But if time is of the essence, consider these tips:
- Shoot to get your current credit limit raised. According to LearnVest, this will lower the percentage of credit you're using compared to how much you could use. But just make sure that you don’t increase your spending along with it.
- Open another credit card. According to Credit Karma, this will increase your credit limit overall, making it look like you have that much more space available. Be sure to search for one with favorable terms, low interest rates, and no annual fee.
- If you’ve been hit with late fees, attempt to negotiate your way out of them. Sometimes, this can be as easy as calling your credit card company and asking to have it removed. If you rarely pay late, they’ll often give you the “well because you’re a regular customer of ours…” speech and nix the late fees from your statement. Displaying gratitude will go a long way.
While finding car insurance with a reasonable rate can be challenging, it’s absolutely necessary before you get on the road. But before you dive head first into applications, be sure to know your rights. Take a look at your individual state’s insurance department to see what type of information is evaluated, and to search for valuable tips regarding how to keep your rates down.