In most states, your credit history can play a role in how much you pay for car insurance. But if you have poor credit, your rates will be significantly higher than those of drivers with good to excellent scores.
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By focusing on responsible financial management, you can move up the insurance score ladder and save money in the long run.
Driving Record
Whether you have an accident or traffic violation on your record is another factor that can affect your insurance rates. Typically, people with at least one serious offense such as a DUI or major traffic violations pay higher premiums than those who have clean records. The good news is that even if you have had an accident or ticket, it’s likely that you can save by getting a defensive driving course.
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Some drivers, especially young ones, can see their auto insurance rates go up when they get a DUI or have other dings on their driving records. But that doesn’t mean that they won’t be able to save by moving over to their parents’ policy or by avoiding risky behaviors like speeding.
The type of car you drive also plays a role in your rate, as does the amount and types of coverage you choose. Some states also consider gender when setting rates, with young male drivers often paying slightly higher prices than females.
Your insurance company may use its own scoring system to calculate your premium or rely on a third-party score such as the FICO credit score. In any case, you can ask to see the exact formula used by your insurer. Under federal law, you are entitled to a free report from each of the three major credit bureaus Experian, Equifax and TransUnion once every 12 months.
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Many states have laws limiting how much credit information insurance companies can use when calculating your premium, and some have banned the practice altogether. You can check with your state’s insurance-regulating department to find out if this is the case in your area.
In addition to a credit score, an insurer will look at your personal and driving history, such as years of experience, number of accidents or traffic convictions, and the vehicle you drive. You can also save by bundling your car and home insurance with the same provider.
Age
Many people are surprised to learn that their credit scores don’t only impact loan approvals or interest rates. They also affect car insurance rates, as the majority of car insurers use a customer’s credit history to help determine the price they pay for coverage. The good news is that improving your credit can save you hundreds or even thousands of dollars in premiums, so if you have bad credit there are strategies you can follow to gradually improve your score.
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