I have just read a couple of disturbing blogs that say a poor credit rating will increase your car insurance costs! Admittedly, the sites that I have seen so far are good old US of A, so is this happening in the UK? Well the honest answer is that I don’t really know, but I think that you should be aware of the fact that, a poor credit rating may have a direct effect on you Insurance costs. You see you can be very certain anything that starts in the States, will trickle over here to GB! Hell, also if the insurance companies can find another excuse to up insurance costs, they will!
Car Insurance In the Good Old Days
I think we all understand that part of the formula for calculating car insurance revolved around type of vehicle, demographic and your personal factors. These main factors that were/are used to calculate the possibility of you damaging your car and the overall risk to the insurance company. So therefore, the amount you pay depends on a lot of factors, your age, male or female (it would appear that one sex is better at driving than the other) where you live etc. So from all this the insurance company could work out the premiums. As @Savvy_Woman says: “Not heard of this in the UK yet. Also, you say gender affects insurance premiums but it was outlawed a year ago.”
Bad Credit Rating Equals High Insurance Costs
It would now seem that a major American company that advises the insurance industry have found a link between your credit rating and insurance risk. Does a bad credit rating cause you to crash your car? Well it would seem that people who actively manage their finances better, are less likely to be making a claim on their insurance. So it would seem that there is a link between a persons credit rating and the chances of them making an insurance claim in the future.
It would seem that as a rough guide insurance premiums are increased as follows:
Persons Credit Rating:
- Excellent Score: No Increase
- Medium Score: 25% increase in insurance premium
- Poor Score: Up-to 90% increase in insurance premium.
So as you can see from list above your credit rating could have a very serious effect on how much you will be paying in premiums every year.
Reduce Insurance Costs
So if this system has sneaked into the UK insurance market, then maybe by getting your credit rating improve, may help you to save some money? Either way a good credit rating is better for you!
Yes the picture was taken by Johnny Debt, just after I crashed a car that I had borrowed! Sorry Tom.
There is a good quick guide here on How to Improve Your Credit Rating
#STOM = Stop Thieving Our Money