Many individuals fail to realize how having a bad credit history can adversely affect their auto insurance premiums. It’s no secret that poor credit can follow you wherever you are and affect the different options that are available to you whenever you are making a major purchase such as your auto insurance in California. In most instances, men and women do not understand the reasoning behind this. They just feel the effects of it when signing up for an auto insurance policy.
In an article published online in October of 2013, the CBS Money Watch website stated that a poor credit history could cause your Auto Insurance premiums to double. On average, drivers with poor credit will pay up to 91% more for their auto insurance than individuals with good credit. Even individuals with an average credit score will pay up to 24% more for their California auto insurance. Although bad credit should not hinder your ability to get the insurance protection you need, it does.
It’s all about Your FICO Score
Would it surprise you to find out that the soccer mom living down the street pays less for the same coverage that an unmarried male under 25 years of age does? It shouldn’t. It used to be that your auto insurance premium rates were determined by demographic and personal factors associated with the risk of having an accident and asking your insurer to pay for any damages. Factors such as your age, driving history, gender, and marital status were all considered by insurance companies and for the most part, still are.
About 20 years ago, the auto insurance landscape changed to include your credit or FICO score. FICO stands for the Fair Isaac Corporation, the company that found a specific correlation between individuals with poor credit scores and a higher frequency of them filing claims. This shouldn’t be interpreted as the cause since people don’t have accidents because they have bad credit scores. However, individuals who manage their finances well will be less likely to have insurance-related losses in the future.
FICO scores range from the lower 300’s to the mid 800’s. So you’re probably thinking that since you have a 600 credit score that you’re okay where your auto insurance is concerned. Unfortunately, you’d be wrong since a 600 is actually a poor FICO score. Here is a category breakdown of the FICO scoring range:
• 720 and higher – excellent
• 680 to 719 – good
• 620 to 679 – average
• 580 to 619 – poor
• 500 to 579 – bad
• Under 500 – miserable
The three major credit reporting agencies – Equifax, Experian, and TransUnion – allow you one FREE credit report per year which you should be taking advantage of. You should inspect yours every year to ensure that the report is accurate and to correct any errors that exist before it is time to change insurers or renew your policy.
A Word about Bad Credit Auto Insurance
A large segment of the consuming public has FICO scores that are so low that their auto insurance options are adversely affected. There’s no need to be embarrassed over this; you’re definitely not alone. What matters is that you are on the road to improvement. As your FICO score improves over time, your insurance company will know. And once they are aware that your score is steadily rising, your auto insurance options will improve and you will be rewarded with lower premium rates. In the meantime, your only option will most likely be bad credit auto insurance and you will probably pay considerably higher premiums.
As your FICO score improves, make your agent aware of this so the two of you can sit down and re-evaluate your policy and see where money can be saved. Even with bad credit, you should still be able to protect your family, yourself, and anyone else who is riding in your vehicle with you. Just be sure that you do plenty of research before choosing a company to purchase California bad credit insurance from. It’s important that you research several companies as not everyone listed with the California Department of Insurance is registered to operate in the state. Plus, not all of them provide bad credit auto insurance for those who need it.
To learn more about our Auto Insurance Fresno coverage, contact a member of our customer service team today at 559-275-9911.
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