People looking for affordable auto insurance from reputable companies would do well to maintain a steady and clean credit history. Indeed, a fact that seems to escape people’s notice is that of credit scores being intermittently interdependent with one’s other financial obligations or prospects, such as mortgages and auto insurance.
Accordingly, majority of loan companies review a consumer’s credit score before deciding what quote to give the consumer, or whether the consumer would be allowed to get a loan at all. The same principle holds true with auto insurance. Auto insurers base the decision of how much the quote will be charged on the consumer’s credit score.
Since auto insurance is mandatory in most states, not allowing any consumer to purchase auto insurance is out of the question, and so insurers back it up on the price. Insurers create an “insurance risk score” database for their customers. This score is the mean of an evaluation of one’s ability to pay the premiums. Clean credit score histories showing stability and proof of long-standing relationship with the same credit companies are a green light to cheaper auto insurance.
This principle applies as well to auto loans and payments. As Texas recently learned, late payments on auto insurance would have adverse impacts on one’s credit scores as well. National Score Index Studies conducted by Experian show how Texas was deemed to have the lowest average credit score in the country, scoring well below 600, and raising unfortunate results of higher auto payments. The average auto loan payment is only below $500.00; Texans had to pay more as a consequence.
The study conducted reiterates that even a single late payment for one’s auto insurance could lead to disastrous results in one’s credit scores as evidenced by New Hampshire. The said state accordingly had very little late payers. As a result, their credit scores boosted to up to more than 700.
Moreover, the study specifically shows that consumers who pay fashionably on time have a hundred points more than the late payer – averaging at more or less 700. The consumer with a single late payment would have to watch his or her own score plummet to more or less 600. Other consequences of paying late would be reluctance from auto loaning companies to accommodate the late payer the next time around.
Expert’s advice consumers to build and maintain clean credit histories. If possible, it is better to first build credible histories by paying on time and within one’s ability before making an auto loan or purchase. If for reasons such as time constraints and urgency prevent one from doing so, the next best thing is to improve one’s existing credit history. Consumers are reminded that auto insurance is not the only object affected by scores but other types of loans as well, hence the need to maintain it.
