We all have to worry about fuel costs.
“Can you tell me how to get to the Holiday Inn?”
“Sure. You want to stay on this road for about $6.00 worth, then turn right at the stop sign, go about $1.25, then keep to your left and you will be there in about $3.15.”
Like employing defensive driving strategies behind the wheel in order to avoid collisions, nowadays, we also have to be concerned about how our finances can affect our auto insurance rates. Consider this: missing a single credit card payment could increase the cost of insuring your car, due to the widespread use of an insurance scoring model that considers policyholders’ credit histories.
You may believe that your borrowing behavior may appear unrelated to the risk of something bad happening to your vehicle. The insurance industry, however, says that a credit history can be used to help predict the likelihood of a policyholder eventually filing a claim and costing the insurer money. As a result, insurers are increasingly relying on credit-based insurance scores — calculated using information from policyholders’ credit reports — when providing insurance coverage.
These credit-based insurance scores share similarities with traditional credit scores used by banks and other lenders, including the types of information they consider in order to gauge risk. But they also have some important differences.
Insurance scores are designed to predict insurance losses; credit scores predict the likelihood of delinquency or nonpaying of credit obligations. While some of the same factors or characteristics are used to develop a credit-based insurance score, not all of the credit information is used.
Insurance scores have been in use for more than 20 years, but have experienced a recent surge in popularity. Today, the use of credit-based scores is widespread. FICO, creator of the leading financial scoring model that bears its name, says that roughly 95 percent of all auto insurance policies are awarded today based to some degree, on credit-based insurance scores.
So What Factors Into Insurance Scores?
• Outstanding debt.
• Length of credit history.
• Late payments.
• Collections and bankruptcies.
• New applications for credit.
These factors, along with more traditional factors like age, gender and claims data, are used to determine insurance rates for drivers.
So for everyone who drives a leased car, on credit-card gas, to a mortgaged home, to enjoy their favorite show on a financed big screen TV; for the lowest auto insurance premiums possible, remember to keep you payments UP and your accident claim rate DOWN.
Until Next Time,
7920 Glenview Drive
Richland Hills, TX 76180
Joke Of The Day:
Two guys sat down for lunch in the office cafeteria.
George: “Hey, whatever happened to Pete in payroll?”
Sam: “He got this harebrained notion he was going to build a new kind of car.”
George: “How was he going to do it?”
Sam: “He took an engine from a Pontiac, tires from a Chevy, seats from a Lincoln, hubcaps from Caddy and, well, you get the idea.”
George: “So what did he end up with?”
Sam: “Ten years to life.”
Bumper Sticker Of The Day: