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Most people don't know that there is a way to get lower premiums, even if your credit score isn't perfect. All you need to do is shop around and compare rates from different insurers.
What is a credit score and how is it determined?
A credit score is a number that lenders use to determine how risky it would be to loan money to someone. The higher the credit score, the less risky it is for the lender and the lower the interest rate.
Several factors can influence your credit score. Some of the most important ones are:
- Your credit history: How long have you been borrowing money and paying it back on time?
- Your credit utilization ratio: How much of your available credit are you using?
- Your credit mix: Do you have various types of loans, or do you mainly have one type?
- The age of your accounts: How long have your accounts been open?
- New credit inquiries: How many times has someone checked your credit score recently?
Generally, factors such as having a long-established credit history, no late payments, or past-due accounts will result in a better credit score.
How does a credit score affect insurance rates?
The Federal Trade Commission conducted an independent study to examine the link between credit history and risk. Their research revealed that credit scores could accurately predict the likelihood of an accident. That is why insurance companies use credit scores to determine your premiums. In most cases, the higher your credit score, the lower your premiums will be. This is because insurance companies correlate high credit scores with low-risk borrowers and therefore are less likely to make a claim. Whereas people with poor credit scores are more likely to make a claim and cost insurance companies more money.
Can you get lower premiums if your credit score isn't perfect?
There is no one-size-fits-all answer to this question, as each insurance company has its own policies regarding credit scores. While many insurers offer discounts to customers with good credit scores, people with low credit scores can still find good deals by shopping around.
How can I improve my credit score?
If you want to improve your credit score, there are a few things you can do:
- Make on-time payments every month.
- Keep your credit utilization low, meaning you should not borrow too much money compared to your available credit.
- Correct any errors on your credit report.
Conclusion
Your credit score is one of the most critical numbers in your life, affecting everything from your loan interest rates to the cost of your insurance premiums. If your credit score is lower than you would like, there are still ways to get lower premiums. One option is to shop around and compare rates. A company that specializes in low-credit scores can help you save a significant amount of money.
Luckily at MIDFLORIDA, we make shopping around for rates easy. Our members get access to a personal insurance agent who will shop for rates from over 40+ top-rated insurance companies so you can rest easy knowing you’re getting the best rate. Get started online or call us today!
