When you apply for auto insurance, even when getting an online quote, you’d be surprised by the amount of information the insurance companies go through before telling you how much your premiums will be!
What are They Looking For?
The number one thing that insurers always look for is a clean driving record. They will investigate your record in the state you’re living in as well as every other state in the country via a central database. They will verify your birth date and compare it to other personal information to confirm that you are who you say. They will dig into your driving records everyplace you’ve been issued a driver’s license and also cross-index other insurance records. All this can take place in just a few minutes-or seconds, depending on the speed of their computers!
But that’s not all that insurance companies are looking for; you’ll also find that they thoroughly check out your credit report.
Why Should They Care About My Credit Score?
Your mother or grandmother may have told you that she can look at your friends and see your future. Well, insurance companies can look at your credit score and see future! Like the friends you choose can show your character, your credit score indicates your sense of personal responsibility.
Let’s say that you’ve made some mistakes in the past and your credit score isn’t so great. You’ve maxed out your credit cards during a rough patch and are paying them off with minimum payments. You have no savings, a couple of late payments on record and your credit score is in the low 600’s. This tells the insurance company that you don’t think about the future much and probably don’t take precautions against unexpected financial downturns. You’re someone who is living in the present and not looking towards the future. Is that accurate?
Whether that’s a true picture of someone with that credit score and history, that’s what the insurance companies see and what their statistics tell them is a logical conclusion. Their data also tells them that a person with such a low score also has a high risk score-they are more likely to make a claim than someone with a higher credit score.
Don’t Ask for Trouble
Keep an eye on your credit report and make sure that it is accurate, checking it at least once annually. Improve it as much as possible, paying more than minimum payments and specifying that the extra go toward the principle. You’ll be rid of credit card debt in half the time if you pay in that manner and it will look good on your credit report.
Don’t try to toggle your risk factor by omitting details about your driving record! If you leave out citations or convictions on your application or deny that they exist, you could be setting yourself up for a fraud charge. Even if you aren’t charged with trying to defraud the insurance company, it will be on your record for every other insurer to see.
In short, be frugal and honest! Good money management and an application that is factual will definitely save you money on your auto insurance.