Well, truth be told, bad credit affects your auto insurance premiums in a MAJOR manner. And the sad part is, it is a major effect towards the negative.
In order to understand the connection, first, you need to understand the factors affecting your auto insurance premiums. Here are some of the things that are taken into consideration when you apply for an auto insurance policy:
- Your car – this is understandable. Insurers will look at the condition and status of your car. How old is it? Does it have safety devices installed?
- Your usual destinations – depending on where you live and your usual destinations, your auto insurance premiums can vary. If you go to places that are considered high risk a lot of times, increase a spike in your auto insurance policy.
- Your driving history – do you have a history of being a reckless driver? If yes, you better save up for your auto insurance premiums.
- Your credit history – there it is, in plain view. Your credit history is reviewed whenever you apply for any kind of insurance. Perhaps insurers just want to make sure that you have a good discipline of paying your responsibilities. But more importantly, insurers connote a bad credit history with high risk. Yes, there may be some extraordinary circumstances that led you to have a bad credit history, and it’s not likely that you will be more prone to any vehicular accident than the next kid in town who has a better credit standing. But the bottom line is that insurers will form a profile of you based on what information they can gather. And your credit history is as good as any indicator of your past performances.
So might as well keep your credit report in shape. Not just for lower auto insurance premiums but also for sleeping better at night.