Credit Cards - How They Affect Your Insurance Rates
By: Bryan Pringle, Ph.D. | Posted: 05th November 2007
Are insurance rates really affected by credit cards? Some think that is a ridiculous notion. The thought that the two are even remotely related is absurd; isn't it? How can paying credit cards late, having too much credit card debt, or even a delinquent credit card bill affect your insurance rates. Well, let me tell you how.
What many consumers don’realize is that in numerous states, insurance companies have been allowed to examine your credit. Laws have been passed that allow insurance companies to check your credit to determine your insurance premium rates, or even deny coverage based upon your credit rating.
Supposedly, the argument by insurance companies has been, that if a consumer pays their bills late, or is delinquent on their bills, or is irresponsible in accumulating too much debt, then the consumer is obviously irresponsible in all aspects of life. This would supposedly include, driving irresponsibly and paying insurance bills late. This in turn; as they argue; would make the insured a high-risk driver.
What’s most interesting about these laws, is that many states require consumers to have a minimum amount of liability coverage on their automobiles. Many states have heavy penalties for individuals who don't carry the required automobile insurance.
Okay, so what if you have such a bad credit score, that you can’t get automobile insurance? Hmm...that’s a good question. In the states that force consumers to buy automobile insurance at rates that are determined by the insurance industry, based upon your credit rating, there are usually special state-run insurance programs that are for high-risk drivers and consumers that have bad credit score. So if a consumer can’t attain automobile insurance due to bad credit, then they would be labeled as high-risk drivers.
What is a high-risk driver? A high-risk driver, is someone who has been convicted of driving while intoxicated, driving under the influence, vehicular manslaughter, drug possession, or it could just be anyone who has an excessive amount of traffic tickets or numerous accidents on their driving record.
Let's get back to the initial question: “How do credit cards affect your insurance rates?” Answer: Too much credit card debt, too many late credit card payments, and any credit card delinquencies on your credit report, and you’re looking at a hefty insurance rate.
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Tags: high risk, good question, aspects of life, credit card debt, credit score, insurance companies, insurance industry, driving under the influence, automobile insurance, insurance rates, insurance premium, liability coverage, risk driver, insurance programs, risk drivers, insurance bills