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Credit Repair and Car Insurance Rates

Credit repair and car insurance rates have a connection many people are not all that aware of. Many drivers in all areas of the country have battled various monetary issues, especially in recent years as economic conditions nationwide have left millions financially downtrodden. Having to resort to using credit cards to pay for basic necessities and things of that nature have influenced their scores in a negative way. Credit performance is directly tied to car insurance costs. Consumers with poor scores have found this out the hard way. But working on your credit score and getting into credit repair can reverse this effect, giving you a new chance to save on your premiums and accelerating the financial recovery process.

Many Drivers Have Credit Issues

At any given time, millions of consumers across the country have financial issues to one extent or another. Some may just have a mark or two on their report resulting from a few late payments recent enough to show up. Others have much more serious problems, with concerns from habitual late payments to repossessions and bankruptcy appearing in their credit report. The bottom line is that if you have marks on your report, you are not alone.

Yet you do pay the price on your auto insurance, even if it is true that this is a common problem. Anyone who has been through a serious credit situation can attest that it costs you in ways you might not expect, beyond just having to pay higher rates for loans or having a hard time qualifying for them at all. Poor credit has a direct effect on auto insurance premiums. And the reason for this is very simple and very direct.

Credit Scores Tied to Premiums

Credit scores are directly tied to premiums because of the way auto insurance providers calculate these premiums. Car insurance companies all use similar formulas to determine eligibility for programs and premium prices for different drivers. One of the major elements in use in these formulas is what is known as credit based insurance scoring. Credit based insurance scoring takes the driver's credit profile and uses it to generate a car insurance score. Though it is not exactly a credit score, it is directly derived from that score so your payment history is crucial to your efforts to save on car insurance.

Credit based insurance scoring is not the only factor in use by car insurance providers, of course. But it is a major factor and thus, drivers should be aware that it is in use and that they need to stay on top of their credit even if they are not planning to buy a house or make any major purchases in the near future. Credit based insurance scoring derives an assessment of assumed risk from your credit score.

It presupposed based on historical data that drives with excellent scores are much less likely to get into accidents or make major claims than are drivers with poor scores. These assumptions have been borne out in general data from segments of the driving population over the years, but do not have anything to do with you or your driving directly. They are just indirect assumptions about individuals based on assessments of whole populations. You can argue until you are blue in the face that these assumptions based on only indirect (and some say questionable) data is unfair to drivers who have proven to be safe out on the road, but until credit based insurance scoring is deemed illegal (and though some have tried legislators have been unable to do this), it will continue to be used in determining risk.

Credit Repair Saves You Money

All of this comes back to the contention that credit repair saves you money as a driver. Some finance professional make a living specializing in helping people through the credit repair process. They can often get certain things removed from your record at times, even if they are accurate. Many consumers believe it is a waste of money to use a credit repair service, but when you factor in the potential long term savings on items like car insurance, the one time cost of these services can be well worth paying if the professional you hire knows how to get the job done right.

But the major key to all of this is a change in perspective that can allow you to see where you erred in the first place. Consumers who pay for this service have yet another reason not to let their credit lapse again because of their financial stake in the matter. Take care of your credit going forward and take full advantage of the positive connection that exists in the correlation between credit repair and lower car insurance rates.


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