Bad credit risk, bad driver?
This is a good year for California drivers. Basically, voters wanted car insurers to set rates based on the driver’s record and the number of miles driven. Several years ago, the Commissioner for Insurance announced new rules prohibiting the use of ZIP codes as the primary factor for determining car insurance rates . These laws came into force on July. This is one battle won for consumers’ rights. Almost every company seems to think that people with low credit score make bad drivers. So what’s going on? Well, it’s all about how to define risk. All the factors go into the melting pot. How old you are, where you work, where you live, whether you own or rent your home, whether you own the car outright or have a car loan, what make and model of car, and so on. Is it fair to look at this information? Unfortunately, yes. Just as a loan company wants to know more about you before making the offer of a loan, car insurance companies want a better idea of whether you take care of your financial affairs before agreeing to pay out if you get in a traffic accident.
The first step in setting the cheap auto insurance rate is whether you qualify for any discounts. For example, most companies offer discounts if you can pay an annual premium rather than by monthly or half-yearly installments. Then comes the math work. Add in lack of consistency in employment and multiple lines of credit getting close their the maximums, and you’re considered a higher risk driver. It may not feel fair. It probably isn’t completely fair. But that’s the way insurance credit scoring works. So, before you go online for your next car insurance quotes , check out your credit score and, if necessary, repair the score.
