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Changes in Credit Score Strong Reason to Check Auto Insurance

By Sally Maison
Published: Monday, January 18th, 2010

People do realize how important it is to have auto insurance. But during these tough economic times, it has also become important to have more affordable policies. With many carriers charging consumers according to how risky they appear, industry specialists say it is imperative for policyholders to review their insurance whenever there is a significant change in their credit ratings as it will most likely affect how much money they will have to get from their pocket.

Changes in Credit Score Strong Reason to Check Auto Insurance Changes in lifestyle could mean being eligible for better and cheaper rates from other carriers, says Christopher Bassard, executive vice president of an Albany, N.Y.-based insurance agency.

Specialists note that many auto insurance providers across the United States are considering the credit score of policyholders when computing their premium rates. Providers may charge higher rates to people who have lower credit ratings, according to Eric Poe, chief executive officer of an insurance firm in Princeton, N.J. Policyholders with low credit ratings may be charged with higher premiums even if  records show that they are good drivers. Poe advises consumers to check with other providers if they are charged higher because of the change in credit score. There are some companies that give more weight to other factors, he adds.

Experts remind consumers that credit score changes do not only affect people who are struggling with debt payments. Even borrowers who are doing well on their finances may see their ratings drop because of multiple credit inquiries. This happens when consumers shop for mortgage refinance, buy new furniture through a finance plan, or open a new card account.

Bassard tells consumers that they can expect higher premium rates if their credit scores change before they renew their policies. As the provider takes the new rating into account during renewal, a lower credit score could mean higher auto insurance premium.

Policyholders who have managed to increase their credit score substantially before the expiration of an auto insurance contract may find better rates from other carriers if they shop around. When their scores do change, experts say it is time for consumers to look for a provider that gives more weight on ratings than driving records.

Those who have recently been laid off are very likely to see their ratings drop. Since they will have to drive less as well, they can keep high insurance rates from adding up to their financial burdens by talking to an agent and letting him know about the drop in mileage. Rates go down by driving less, Poe explains.

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