Bad Credit Blues

• Most people understand that low credit scores will translate into higher mortgage and credit card interest rates. Yet, few realize there are plenty of other insidious ways that a low score can add to a person’s cost. Bad credit can also negatively affect your job utilities, cell phone, elective medical procedures, your marriage, and your ability to purchase and maintain a car.

Car Insurance

• Consumers with bad credit pay between 20 – 50 % more in auto insurance premiums than their good-credit neighbors, says Clarence Smith, who authored an insurance study for Conning.

What Does Your Credit Have To Do With Your Insurance?

Insurance companies gather all possible data points and use them to develop profiles. Over the years, they have determined that individuals with less than stellar credit are more likely to get in accidents and file claims. Furthermore, insurance companies are more likely to incur the costs associated with late payments, insufficient funds, and premature cancellations from customers with poor credit.

What You Can Do To Lower Your Rates

If you’ve made mistakes with credit in the past, take comfort in knowing that you’re not alone. In fact, as the number of Americans with poor credit increases, the old profile of the credit-constrained insurance customer as a high-risk driver is likely to change. After all, there is considerable difference between maxing out a credit card and running a red light - and time should enlighten the insurance industry to this fact.

Meanwhile, it’s important to note that your credit history is far from the only factor in determining your insurance rates. Your driving record, the type of car you drive, your age, marital status, where you live, and a myriad of other profiling factors. The best thing you can do to lower your insurance premiums is to be a safe driver who avoids tickets and other traffic incidents and pay your bills on time. A safe driver in the middle of bankruptcy is a much better risk for insurance companies than a convicted drunk driver with stellar credit, however the impact of your credit on your car insurance is certainly not a fender bender either.

Car Loans

Before shopping around you MUST know what you can afford. Take time to put together a BUDGET and know what your discretionary income is (Income – Expenses = Discretionary Income). At this time you are on your way there but there are many more obstacles you’ll have to climb through before you ride off in your new car.

Financial Counselors of America can assist you setting up this budget, assessing your situation and be able to provide you with priceless advice that will not only educate you about your own expenses, but save you thousands of dollars at the same time!