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How Your Credit Can Affect Your Car Insurance Rates

Credit score of an individual reflects his financial status. Most people do not realize that a dip in the credit score would result into high car insurance rates. Considering the decreasing credit reputation amongst the masses, it won't be an understatement to claim most of them bear a high cost towards the insurance premium. Majority of the auto insurance providers use the credit history of a person to evaluate the risk factor. It's presumed that it's safe to provide auto insurance to a person with good credit score. On the other hand, insurance companies assume that it's risky to provide insurance coverage to car owners with bad credit score. Insurance companies believe that there is a direct correlation between credit score and expected claim that may potentially occur. They have substantial data to back their claims. Therefore, they presume that individuals with bad credit score are more likely to bear severe insurance losses.

The fact that insurance companies believe that they are taking a huge risk by providing car insurance to individuals with bad credit score, they charge high car insurance rates to individuals with black marks on their credit report. Today, insurance companies use different kinds of scoring models to evaluate the credit score. In most cases, the method used to evaluate the credit score is kept secret to prevent misuse. Since every company uses a different method to determine the credit score, it would be difficult to tell what credit score would appeal to them. As a smart consumer, what you should know is that most companies will not proactively update the policy, if your credit score improves over a period of time. You will have to personally notify the insurance company so that they can update your policy. This move would result into lower car insurance rates.

If you believe that your credit report reflects incorrect information that is affecting your financial image, you should inform the credit bureau. The credit bureau will act upon your request and investigate on the matter. In most cases, they will get back to you within 30 days of filing a complaint. One can either wait for the error to get fixed, or inform the insurance company about the error in the credit report before the waiting period is over. While minor errors won't have much impact on your credit ratings, major errors once fixed can drastically improve your credit score. Most insurance companies won't adjust the premium, until the score is corrected, but it won't hurt to request them for a premium adjustment. Surprisingly, some car insurance companies may consider your request. Subsequently, they will reduce your car insurance premium.

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