Crediting Your Insurance Policy

By Jay Tillotson

Have you ever wondered just why you seem to pay more insurance than your friends and family? Why is it that you can buy a cheap car, with no modifications, yet your insurance is through the roof? The answer may surprise you.

It's a fact that the type of car will affect the premiums you pay, as will any modifications you make, and the age of the driver/s. This is common knowledge, and there isn't much you can do about it apart from choosing a different, unmodified car. But many people don't realise that there is one factor which can adversely affect the premiums which actually has nothing at all to do with your car; your credit score.

More frequently, insurance underwriters are turning to the credit reference agencies Experian and Equifax to help them decide what premium rates to quote applicants. This is increasingly bad news as the country dives deeper into debt because of the credit crunch. More people are missing repayments on bills, loans and mortgages which is showing up as black marks on credit files, and of course this is being relayed back to insurers resulting in higher premiums. This has the knock-on effect of less spare money to pay for bills...the vicious circle is clear.

It makes people wonder just why a couple of missed payments is affecting their insurance. After all, you don't drive with your credit card! But in actual fact, most insurance companies are of the opinion that someone who is irresponsible with money will also be irresponsible on the roads. While this may have some truth, it seems a little unfair in light of the struggling economy; most people, however careful, will miss a payment at least once because of financial problems.

It's difficult to repair your credit score unless you have the spare money to do something about it, but it might be worth getting hold of your credit file to check its accuracy. When a company does a credit search on your file it leaves a footprint; if there are too many of these footprints it can look bad, so make sure each company leaves no more than one. Also check that any debts you have cleared are listed as such.

Once you know your credit score is complete and accurate, compare car insurance quotes to see if it makes a difference. Cheap motor insurance is easier to get if your credit score is good. The same goes for other types of insurance.