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Credit CardsDriving means money. You have an obligation to pay for regular maintenance, repay your loan and even pay for gas. You also have a responsibility to carry auto insurance.

Your financial solvency will play a role in how you pay for your car and your insurance. If you have poor credit, you might struggle to afford many of the costs associated with car ownership. This poses a risk to all other parties involved in the deal, including insurers. Your poor credit might actually mean you wind up paying more for your car insurance.

Understanding Your Credit

Think of your credit score as an indicator of your financial solvency. If you apply for credit, a lender reviews your eligibility for the credit. When you make a purchase using this credit, the creditor will pay the recipient they money you owe. This action will cause you, the credit holder, to owe a debt to the creditor. The creditor will expect you to pay the debt back to them.

Your credit score essentially measures the debt you carry relative to your income. In other words, it is one way to value your ability to repay that debt. It is a three digit number ranging from 300 to 850. The higher the number, the better your credit standing. Having good credit more or less means that your lenders know they can count on you to eventually repay your debt. Generally, satisfactory credit scores range from around 600 upward.

Low credit scores mean creditors may view your solvency and ability to repay debt as precarious. This may be because you keep using credit and accumulating debt in order to make ends meet. Generally, this does not indicate fiscal responsibility. Your credit score is not an indicator that you are a bad person. However, it should signal to you that you should take steps to rein in your finances. Without a good credit score, you might not qualify for loans or other types of investments.

How Credit Affects Auto Insurance Rates

Many auto insurers look at your credit score when determining whether to issue you a policy. To them, your credit score might be an indicator of the cost risk they will invest in you.

Your credit score might not indicate that you are a good or bad driver. However it could show insurers that you might have a hard time paying to keep your policy active. Or, it might indicate that you will be more likely to make a claim. For example, if you don’t have funds to pay for car damage, your likelihood of contacting your insurer for assistance increases. If you have a low credit score, your insurer may take it as a sign that they will have to pay.

Therefore, drivers with poor credit might have to pay more for their auto insurance. Since insurers assume more responsibility for high-risk drivers, they usually make them pay more. Indeed, some insurers may not insure drivers with poor credit at all. But, never fear, there are ways you can improve your credit and take steps to still afford your car insurance.

Getting Car Insurance with Bad Credit

Even if you have low credit, you can often still find insurance at affordable prices. There are often various avenues through which to lower policy prices:

  • Increase your deductible. Your deductible is how much you will pay for vehicle damage before your insurer will pay. Increasing the deductible takes some of the responsibility away from the insurer. This could lower your risk in their eyes, and they might lower your premiums.
  • Talk to your insurance agent about buying coverage from an insurer that doesn’t use credit scores when determining rates.
  • Ask about policy discounts from your insurer. These may include accident-free discounts, auto-payment discounts and other price savings.

Furthermore, begin to take steps to improve your credit. Doing so will take time, but credit scores are temporary.

Improving Your Credit Score

Your credit score can change for the better. You may find that better credit increases your financial stability. Take these steps to begin improving your credit score:

  • Pay back your debt. You should keep credit card balances as low as possible. Never let balances grow unchecked.
  • Pay your bills on time, even if you cannot pay in full. Especially pay your car loan, mortgage and insurance bills without missing payments. Always make a concerted effort to pay off balances as quickly as possible.
  • Do not spend recklessly, doing so may increase your debt much faster than you can manage. Work on saving money.

Remember, check your credit score annually or semi-annually. Doing so can help you keep a close watch on your changing score. If you make an effort to be a responsible spender, you can positively impact many parts of your life. Your auto insurance price is among the payers that could benefit from good credit. Talk to your auto insurer for more details. They can help you understand how to maximize the benefits of your credit. Call Peachstate Insurance at 877.997.2478 for College Park auto insurance.

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