Tuesday, 19 July 2011
High Credit Rating Could Result In Lower Auto Insurance
Most people realize and understand that their driving record, sex, and age are usually used by auto insurance companies when calculating their yearly rates. However, many drivers don’t know that their credit ratings are also being used as a factor by some companies when deciding how much to charge. It might not be fair, but in most American states it’s legal.
An article on MainStreet.com reported that a new study said there’s definitely a link between credit ratings and insurance premiums. In addition, CarInsurance.com reported that drivers who have a credit rating that’s above 750, pay about $785 less for their insurance each year when compared to same-aged drivers whose credit rating is below 700.
It’s estimated that a 25-year-old driver who has a good credit rating would pay about $22,800 less by the time they retire. However, the method of calculating rates by using credit scores isn’t used by all auto insurance companies. Many of them only use the practice when customers opt to pay their premiums in monthly installments.
Understandably, not everybody is happy about the inclusion of credit ratings when calculating premiums and some state legislatures have challenged it. Seven states have even passed legislation that restricts the practice. These include Texas, Michigan, and Maryland. If you’re not sure what the laws are where you live, you can check with the insurance commission in your state to see what methods are being used and if there are any restrictions.
If you’re going to pay your yearly premium up front you may not be subjected to a credit check. If you do find your state allows the practice you may want to try the pay-as-you-drive type of insurance policy to get cheaper rates.
Insurance companies can track your driving practices, such as speed and distance, by inserting a device into your automobile’s technology system. If the results are favorable, lower rates are often offered.
