If you’ve ever bought a house or a car, you know how a bad credit history can translate into higher interest rates. But did you know it can also mean higher prices for car insurance?
That’s what a new study claims. Earlier this month, InsuranceQuotes.com looked into something called a credit-based insurance score. That’s not the same thing as your credit score. It’s actually much more complex.
“Your credit-based insurance score is calculated using information in your credit report,” InsuranceQuotes.com says. “But many insurance companies have their own proprietary methods for using your credit information and evaluating it.”
Bottom line: If you have just the median credit-based insurance score, you can pay 24 percent more for car insurance than a driver with an excellent score. And if your score is poor? You could pay a jaw-dropping 91 percent more.
Want to see your insurance score? Good luck.
“I wish consumers could see their score,” says Lamont Boyd, insurance underwriting expert at Fair Isaac Corporation (FICO). “The problem is that there are several different scoring models currently in use to calculate credit-based insurance scores, including models developed by third-party vendors and individual insurance companies. There are just too many variables and inconsistencies.”
Here’s what we do know: The various financial data that goes into determining credit-based insurance scores include…
- Outstanding debt
- Length of credit history
- Late payments
- New application for credit
So what can you do? Getting out of debt and building up a reliable credit history will mean a huge difference, even if you don’t grasp the many complexities of topics like credit-based insurance scores. To learn more, visit Consolidated Credit’s comprehensive Credit section.