Your Credit Rating Could Be Why You Pay High Insurance Premiums

Yes, it is true. The better your credit rating is the less you may be paying for your car insurance? Why? This is one factor that many insurance companies are now using in figuring up your payments.

Yes, your driving record counts. Yet, if you have a perfect driving record and bad credit, you may be paying two or three times more for your car insurance than the person with a good driving record, plus good credit? Why?

One reason is that some insurance companies believe that a person with a good credit rating is a more responsible person. This means they believe a person with a good credit rating would be a more responsible driver than the driver with bad credit.

Another reason is that insurance companies believe that a person with a good credit rating may have more cash in hand. They assume people with bad credit are more likely to be living month by month, paycheck to paycheck. Therefore, a person with better credit may have more money on hand and are more trustworthy to make their payments on time.

People who are against insurance companies using credit scores as a device to decide payments say it is unfair and that it discriminates against a lot of people.

Yet, those who are in favor of using credit ratings as a device to determine insurance payments say that a person's credit rating shows a lot about a person's responsibility. They also say that insurance companies have very few factors in which they are allowed to use to base payments. It is illegal for them to base payments on race, religion, income and geography factors.

Bills have all ready been introduced in 21 states in 2007, to prohibit or limit the use of credit information by insurers. In 2006, 20 bills were introduced. Louisiana passed one, which covered the hurricane victims.

Most states use credit ratings to determine their insurance rates, yet most people are not aware of this practice, even though this is one of the biggest determining factors when it comes to determining what they are paying in premiums.

So what can you do help achieve a better credit rating:

First check your credit history, make sure it is accurate. Go to www.annualcreditreport.com for your three free listings you are allowed per year (one from each major credit bureau).

Close the accounts (including store accounts) that you rarely use. Do not open new ones for just to get a special promotion.

Pay more than your minimum monthly balance each month on the credit cards you use

Talk to your own insurance company and ask them if they look at your credit rating when considering your payments. If the answer is yes, see what bracket they have you in and have them to review their overall scheme with you to see if you can get an upgrade. If you don't like what you are hearing or the price you are quoted, shop around for a better insurance deal.