Your credit scores help determine what you’ll pay for an auto loan – and Auto insurance.
Studies by state regulators, universities, and independent auditors show that such credit information as how often you’ve paid a bill more than 60 days late can predict your probability of making an Auto claim and its cost. Insurance companies use this data to help set premiums.
However, one study found that 96% of Americans don’t review their credit report once a year, even when they can do so for free. According to the Federal Trade Commission, one in four consumers had errors on their reports that could affect credit scores – and 5% of these mistakes could mean that they’re paying more than they should for Auto insurance and financing.
To make sure that your credit report is accurate, improve your score, and keep your Auto premiums down, experts recommend these guidelines:
- Order free reports from the three credit reporting agencies (Experian, TransUnion and Equifax) through AnnualCreditReport.com , one every four months. Correct any errors immediately.
- Pay your bills on time. Payment history counts for 35% of your score.
- Keep your credit card balances below 20% of available credit.
- Monitor your credit history. Because credit bureaus look at how long you’ve had an open and active line of credit, the worst thing you can do for your credit score is to close credit card accounts. Not only do you lose your credit history for that card, but your overall utilization ratio goes up.
- Don’t open new accounts in quick succession. This represents a greater risk, especially for people who don’t have a long credit history.