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Why Should My Credit History Count When Buying Car Insurance?

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Your credit history plays a vital role when it comes to getting the best car insurance rate

Most insurance companies will always hard check your credit history before approving your application if you intend to pay for your car insurance policy monthly. 

A bad credit score tells them that you are too risky to sell a policy to and as a result, they will increase your car insurance cost. In some cases, they might as well reject your request.

The only states in the United States where government policies don’t permit insurance companies to check your credit rating before approving your application for a car insurance policy are California, Hawaii and Massachusetts. 

Your credit history doesn’t count when it comes to purchasing the best car insurance policy in California, Hawaii and Massachusetts. This is because the state law prohibits credit from being a pricing factor.

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How does credit scores help an insurance provider?

Why Credit History Count When Buying Car Insurance

Credit scores help car insurance providers to assess the risk level of a potential customer. Policyholders with lower credit scores are more likely to file claims.

Credit scores below 600 are what insurance companies consider to be poor. If you find yourself within this range then you must be ready for a surcharge. This is why it’s always important to work with a reliable agent when thinking of how to choose the best car insurance rate.

Having a poor credit history can make you pay 71% more than your fellow driver with a good credit score.

Your credit score can also affect how an insurance company allows you to pay for your policy since statistics show that people with lower credit scores are more likely to miss a payment. 

Customers with very poor credit scores may be required to pay the entire premium for a six-month policy upfront. Customers with low credit scores sometimes won’t qualify for monthly billing, or they may need to pay a large percentage of the policy upfront and the remainder monthly.

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How can car insurance affect your credit history?

There’s this thing called, ‘Instalment loan’ done by UK insurance companies where you are giving a loan to pay for your car insurance policy monthly. When you are able to pay back in full and on time each month, it helps to grow your credit score over a period of time.

However, when you pay late or miss your payment, your credit rating automatically goes down. In order to lower your car insurance cost, you can decide to bundle your car and home insurance by obtaining them from the same firm.

With the information obtained from your credit report, your policy provider calculates your credit-based insurance score. This credit-based insurance score is a 3-digit number that provides an assessment of your insurance risk at a particular point in time.

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