Whether they like it or not, most American drivers understand that auto insurance is a necessity. That being said, they probably wouldn’t mind paying a bit less for it. Although the commonly held belief is that having a stellar driving record will play a big role in how low your insurance rates are, a recent Consumer Reports analysis has found that there’s another factor that might matter more to your insurer: your credit score.
The report found that having a bit of debt or even being late in paying bills can have a huge impact on car insurance premiums. In fact, a couple with two cars and poor credit would end up paying significantly more than if they had two DUI violations. The couple with alcohol and drug violations would pay an extra $1,750 in premiums for their cars, or around $875 for each vehicle with 365 days of insurance coverage. Meanwhile, the couple with poor credit would pay an additional $2,090 per year in premiums.
And that’s not the only strange factor in calculating auto insurance premiums. Some companies will offer discounts to married couples, especially if they are under the age of 25.
Although California and Massachusetts expressly forbid auto insurance companies from using customers’ credit scores to determine premium rates, the same cannot be said for the rest of the union. So even if you’re an excellent driver who married young, you might end up paying an astronomical amount if you haven’t made good financial decisions in the past.
There are a few things you can do to lower your auto insurance rates, of course. If yours was among the 2.4 million weddings performed in the U.S. during the average year, you really can lower your premium quite a bit. That two-car couple mentioned earlier lowered their annual premium by about $535 just by getting hitched. You can also lower it if you own property; Consumer Reports also found that owning a home helped that couple lower their yearly insurance rate by around $110.
But those major milestones still may not lower your rates to your liking. Experts are now saying that the best way to lower those high premiums is to get your credit score in check. As a rule, paying your bills on time and paying off those credit card balances can go along way in improving your credit score.
Other consumers may want to give more consideration to the type of car they drive. Used cars are often less expensive to insure, and if you’re not getting the most out of your vehicle, you may want to trade it in for a cheaper model.
You might also want to think about raising your deductible or bundling your insurance. Consumers may be able to save more in the long run by doing so. Consumer Reports discovered that, by raising the deductible from $500 to $1,000, that two-car couple could save $140 each year. However, this might not be an option for everyone. But if you already have homeowner’s or renter’s insurance, bundling the two could save even more. The analysis showed that linking auto and home coverage provided $235 a year in savings for that couple in question.
Ultimately, experts recommend that consumers should keep a sharp eye on their credit scores and to check their insurer’s rates every two or three years for possible ways to reduce their payments.