10 Aug Bad Credit May Be Causing You To Pay Higher Insurance Rates!
Insurance Rates and Credit Scores
It seems like almost everything is affected by credit scores. Most people probably don’t think about insurance as being something that is affected by their credit scores – what does one have to do with the other? Unfortunately, insurance rates in many states are affected by bad credit. Fortunately, credit scores don’t affect health insurance. However, your credit will affect your home and auto insurance rates in most states (California, Hawaii, and Massachusetts are the only states that don’t allow insurers to base auto insurance premiums on credit history).
How much does your credit score affect your home insurance premium?
A site called InsuranceQuotes.com paid for a study to answer that very question. Homeowners with bad credit pay about two times more for home insurance than those with excellent credit.
Keep in mind you only have to worry about paying house/property insurance if the bank will approve you for a mortgage to begin with!
How much does your credit score affect auto insurance rates?
This answer depends a lot on where you live. Logically, you’d think your driving record would matter more than your credit score. However, that is not how it works in some places.
In Florida, excellent drivers suffer higher premiums if they have bad credit. They pay approximately $2000 more per year than a safe driver that also has excellent credit. Even good drivers with good (but not excellent) credit pay about $300 more.
In Kansas, one moving violation causes an average rate increase of $122 per year. That can be expected. However, try missing one payment or dropping down from “excellent” to the “good” credit category- that’s an increase of $233 per year. File a bankruptcy, and you’ll be paying over $1,000 more per year. In Kansas, your credit score matters more than if you drive safely.
Why are the insurance companies penalizing people with bad credit?
Both the University of Texas and the Federal Trade Commission investigated the relation between credit scores and predicted losses and claims. Could it be true that people with bad credit scores are a higher risk to insurance companies?
Both studies found there is a link. People with lower credit scores tend to file more claims and have higher payouts. If you have bad credit, you’ll be paying higher premiums in most states and with most insurers.
Save money on home and auto insurance
Sure, you can shop around for the best rates. If you have poor credit, you can inform your insurer that you’ve had “extraordinary life circumstance.” That may protect you against a rate increase just because your credit score went downhill. However, it only works if you really had an “extraordinary life circumstance” – a divorce, a death, a deployment, or something else on the list of authorized exceptions.
You can also choose to improve your credit score. Raising your score changes the game for you in many ways. You’ll pay less on insurance, and you’ll get lower interest rates on loans among other benefits. The hundreds or thousands of dollars you’ll save brings you closer to a brighter future.
You might be starting to see the major financial impact having bad credit can have on ALL areas of your life! At Honore’ Credit Consultants we are standing by waiting to help provide you with the financial freedom you deserve!
Call one of our credit consultants today so we can discuss options for helping to improve your credit profile! (844) 967-3724