Drivers with poor credit scores are paying almost twice as much for car insurance as those with excellent credit, a recent report found.

Based on data from six large insurers from across the United States, InsuranceQuotes.com found that drivers with poor credit pay as much as 91% more than people with top credit scores.

And drivers with median credit scores were found to pay 24% more, the report found. CreditScoreTips

Insurers assess drivers using a special scoring model that is different than the one mortgage lender use. Instead of looking at your ability to repay a debt, this score aims to predict your likelihood of incurring future insurance losses, explained Laura Adams, an analyst at InsuranceQuotes.com.

Like regular credit scores, the insurance score is based on reports from credit bureaus and still takes into account things like late payments, outstanding debt, bankruptcies and new applications for credit.

“About 40% of every consumer’s bottom line score will be driven primarily by whether or not you paid your credit obligations on time,” said Larmont Boyd of Fair Issac Corporation says on credit-based insurance rates.

“Responsible habits, such as paying your bills on time and minimizing debt, pay off in many ways, including paying less for car insurance,” said Adams.

Basing car insurance rates off of credit scores is a controversial practice. Opponents say credit-based insurance rates are unfair because they largely and negatively affect low-income drivers. However, supporters say the scores benefit those with good credit.  Source: CNN.MONEY

Credit Scoring Myths

There is a misconception that many potential mortgage applicants think. Most believe that having “not bad” credit will land them a superior rate because there is technically nothing wrong with their credit.  Unfortunately, this is no longer the case as even “good” credit, is now no longer rewarded with the top-tier rates when it comes to lending. CreditReports

To get our free report on CREDIT SCORE secrets, fill out the form below.

Tagged with →  
Share →
Mortgage Programs
Search our site for the latest loan types and programs available from Approved Funding.
Learning Centers
Access our mortgage, real estate and market learning centers filled with a wealth of information.
Rate Quote
Get a quick no-obligation custom rate quote tailored to your unique financial situation.
Licensing & Updates
See the latest licensing, announcements and updates from Approved Funding.
Contact Us
Find out the best way to contact Approved Funding to address whatever your need
Career Opportunities
See the latest Career Opportunities available for qualified and passionate individuals.