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Car Insurance Scoring Models Affect Rates: Good or Bad?

Wondering if your credit score can affect your ability to obtain and keep low-priced car insurance? You should know that it can and it does in most states. Some consumers are questioning whether it should affect their ability to have fairly priced insurance-something that every state requires by law.

Vehicle insurance scoring is a process used by many insurance companies across the United States. It involves viewing your credit score to determine the risk your insurance company takes to cover you. It has been shown that the way you manage your finances is directly correlated to your automobile insurance risk. The insurance scoring model is currently being used in 40 states, and that score is representative of your credit at any given point in time.

The Insurance Information Institute claims that those whose credit scores are lowest file 40% more insurance claims than those with a better credit score. Critics of this system claim that those with a good credit report but a bad driving record could be paying more than a person with a bad credit report and good driving record. These concerns are relevant to how much we pay for insurance; however, the policies insurance companies use to calculate your insurance price probably will not change any time soon.

How Your Rate is Calculated

The way your rate is calculated is that your credit score is inserted into a scoring model, which assigns weights to various factors to determine your number, or score. Your number can range from 100 to 999. The lower your number, the more likely you are calculated to have future insurance claims. Models can vary; however, generally, a higher number indicates that you are less likely to have future insurance claims.

With any classification system, you may find that you're an outlier to the group you've been placed. For example, if you're a 17-year old driver who has never had a ticket or accident, your score is more likely to be low. Since the 17-year-old is in a group that historically has more claims than other groups, which alone places them at higher risk.

Insurance companies are required by law to let their customers know if they use a scoring model such as the one described above. Some companies, while using this scoring model, consider adverse events in your life, and they do not count these events when calculating your score. Race, ethnicity, sex, age, religion, income and address cannot be used against you when using the insurance scoring model.

There are factors that can affect your insurance score. These include bankruptcy, collections, foreclosures, late payments, length of credit history, number of credit inquiries, number of open credit lines and outstanding debt. In order to make sure you have the best price on your insurance, it's best to keep a good driving record and a good credit score.

Save and Improve Your Insurance Score

There are many ways to keep your score in good standing. It's a good practice to pay your bills on time, and keep balances low on any credit card. You should also only open new credit cards if you need to. Opening new cards can negatively affect your credit score, which also affects your car insurance score. Also, you can annually request a copy of your credit score. This will help you look for fraud, and it will make sure your score is accurate. You can also learn how to improve your score by knowing what negatively and positively affects it.

Of course, there are other ways to save on your insurance, regardless of whether or not your insurance agency uses a scoring model. The most obvious thing to do is to keep a clean driving record. Avoiding accidents and unnecessary speeding tickets will help keep your score low. Insurance companies want drivers who are low-risk. If you keep your record clean, you should be able to have a competitive price on your automobile insurance.

Other ways of lowering the price you pay for insurance is to shop around for the best quote possible. Don't assume that you have the best price for the coverage you're receiving. Insurance companies like to offer incentives to new customers. So, it might save you hundreds each year to move your business elsewhere. Online insurance shopping has risen in the past years. One reason for this is that some of the most competitive prices are offered online.

If you know your credit score is no good, it makes sense to shop around and find an insurance company who does not put as much weight into your credit score. Some insurance companies do not use your credit score to calculate your price at all. Using the Internet to shop for the best price may be best for those whose credit score is hurting them. You can use the Internet to shop online for the best, most competitive price. Remember, it's up to you, the consumer, to find the best price. Using the Internet is a fast, safe, easy and effective way to make sure you find the best price out there for your driving needs.

More Car Insurance Discounts

Additional ways to save include bundling your insurance policies. For example, if you have both homeowners and auto insurance, you can bundle them into one policy and save money each year. As your insurance company if they offer savings by bundling. Most companies do offer savings because it requires them to do less paperwork and saves them time.

If you have never taken a defensive driving course and you're paying more for insurance than you want, you may want to consider taking the course. Many insurance companies offer discounts to customers who take the course because they figure it makes you a better driver, which means they file less insurance claims.

If your bad credit score is affecting your insurance policy price, and you have a teenage driver, there are additional ways you can save. Reducing the number of passengers your teenager can have in the vehicle will reduce the price you pay for insurance, as well as limiting your teens nighttime driving. Since teens are more at-risk than almost any other group, these two things can greatly reduce what you're paying for insurance.

If your teen can keep a B-average in school, they are also more likely to be able to lower your car insurance rate. Insurance companies like it when customers make decisions that put them at low-risk. Keeping good grades is one of them. An additional option is to allow your teen to take a driver's education course. It's not a bad idea anyway, and it saves you money on your insurance.

If you're married, you can also reap the benefits of paying less for insurance. As soon as you say, "I Do" go ahead and inform your insurance company of the changes. Auto insurance companies see married couples at lower risk than those who are not married. They view a married couple as being more stable. Cash in on yet another benefit of being married, and reduce your insurance score as soon as you tie the knot.


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