Are you in search of better car insurance rates in North Carolina? Do you want to learn about the different variables that affect the rates that you’re given? If so, then you should start by seeing how your credit score can affect auto insurance rates.
Like it or not, all insurance providers use your credit score as a way to measure the amount of risk of taking you on as a client. All you can do is aim to improve it.
See below for a comprehensive guide on how auto insurance rates are affected by your credit scores and how you can turn that into an advantage.
Why Do Insurance Companies Check Your Credit Score?
It’s a fair question. Why do insurance companies in North Carolina—or anywhere in the US—feel compelled to check your credit score to establish your rates? What connection does that have with the quote they give you?
Essentially, this is their way of getting a better understanding of you. They can use the information they extract from your credit history to evaluate how ‘risky’ you are to provide insurance for.
The thought is that those with lower credit scores are more likely to skip payments on premiums, file more claims, get into more accidents, etc. That isn’t a guess, there is sufficient research to back up that statement.
On the flip side of that, they assume that those with higher credit scores are less likely to require filing a claim. Therefore, they’re deemed less of a ‘risk’ and are offered more favorable rates. Why? Because any insurance provider would be lucky to take them on as a client.
Whether you’re in the Charlotte or Durham area, be sure to reach out to a credible auto insurance provider to get a quote for your needs any time of the day/night.
What Else Do Providers Use to Estimate Your Rates?
Of course, your credit score isn’t considered the end-all-be-all to providers. It doesn’t make or break the rates they’re willing to offer you.
There are many factors that providers use to get you as reasonable auto insurance rates as possible. See below for a few of the most common, as well as a description of how they factor into the equation:
- Your Age– The younger that you are, the less driving experience that you have and the more of a learning curve there will be. That increases the likelihood of you (or your children) needing to file a claim at some point.
- Your Past Driving Record– The murkier your driving record, the more you’re seen as a ‘risk’ by providers, for obvious reasons. However, you can combat that history by taking defensive driving courses.
- The Car(s) You’re Insuring– Certain types of cars are considered to be more of a risk on the roads. For example, the older your car is, the more likely you’ll need to file a claim at some point. However, if your car has features such as anti-lock brakes, it can lower your premiums.
- The Coverage You Need– The more coverage you need, the higher your monthly premiums will be. But if you choose to raise your deductible, you can lower the rates you pay from month to month.
- How Often You Drive– If you drive less, you’re less susceptible to the need of filing a claim. Also, the longer you stay with a certain provider, the more loyalty discounts you’ll receive.
How Can You Improve Your Credit Score?
Now that you know your credit score plays a role in the North Carolina auto insurance rates you’ll receive, how can you use that in your favor? How can you improve your scores fast so that you can be seen as less of a risk? Here are a few of the major ways.
1. Pay Off Credit and Use It Sparingly
Whenever people talk about paying off their debt, their mind automatically goes to a vision of them cutting their credit cards in half. Truth is, you don’t have to be that drastic unless you have a legitimate spending problem.
Instead, work on paying off any outstanding credit you have first. After that’s paid off, be sure to only apply for new credit accounts if you need them. Maintain a low balance on your credit cards that can be paid off quickly.
Also, don’t close credit cards you haven’t used. As Experian points out, closing an account can increase your credit utilization ratio.
2. Pay Your Bills Efficiently
If you want to improve your credit score, pay your bills on time. There’s no better way to work towards a great score so quickly.
Contrary to popular belief, low credit scores aren’t an immediate indication of accrued debt. You could pay off all your debt but, if you don’t pay your bills on time, your score will suffer.
Plus, consistent cell phone and utility payments have been shown to increase your credit score the most. Prioritize those (and rent) above all else.
3. Look for Inaccuracies
Credit reporting inaccuracies happen more often than you’d think. Since humans are filing your information, it’s always possible for an error to occur.
If your score needs to be improved, start by reading through your credit history and look for any inaccuracies there might be. Are there any accounts on your report that look unfamiliar?
If you find any, you can dispute them to get them corrected. Your credit score will immediately improve as a result.
Use Your Credit Score to Find Great Auto Insurance Rates
Whether your credit score is currently low or high, it’s important to reach out for auto insurance rates right away. Don’t wait until you improve your score. Rates can always be adjusted.
Be sure to read this article for more information on what to do when you’re involved in a car accident in North Carolina.
For more inquiries, please be sure to reach out via our contact us page and we will be happy to assist you further.