Posted September 21, 2013 | Filed under topic Auto Insurance Buying Tips
What is a Credit Score?
Technically speaking, a credit score is a 3-digit number figured out by utilizing a complex mathematical equation containing the information in your credit. It is designed to determine whether or not you’re at risk for becoming delinquent in paying for your future credits owed. This is a technical equation to solve, but it’s not hard to understand what the answer (your credit score) means.
Most credit score places use FICO scoring. In fact, over 90% of every place that evaluates your credit score uses FICO scoring. This is why it is important to know your FICO score. In FICO scoring, 760 or above is classified as “excellent” credit. Very good runs from about 725-759. Good is usually in between 700-724. 621-699 is considered fair. Poor is anywhere at or below 620.
How to Know Your Credit Score?
Knowing your exact credit score requires a lot of calculation. This can be quite complicated, and very few people actually know how to calculate a credit score. Even if you know how to calculate your credit score, there is a lot of room for error, so you will likely come up with the wrong number.
This is where computers come into play. Computers are great for estimating credit scores. They can calculate what your estimated credit score is simply by you answering a few questions. One trusted source is the FICO Calculator. It is a 100% free FICO credit score estimator. This will help you understand what your credit score is estimated to be.
Credit Scores and Car Insurance
A common myth that says a credit score does not affect your car insurance rate has been busted. As a matter of fact, car insurance companies in 47 out of the 50 states in the United States are allowed to use your credit score against you when purchasing car insurance. Insurance companies in the states of Hawaii, California, and Massachusetts aren’t allowed to use your credit score against you when purchasing car insurance as it is outlawed to do so.
The link between credit scores and car insurance does exist. The myth that credit scores do not affect car insurance is false. Credit scores may not affect car insurance very much, but according to several studies, those with good credit scores tend to avoid accidents more than those with lower credit scores. Also, those with higher credit scores tend to make payments on time more frequently than those with lower credit scores. Insurance companies tend to reward this by providing a lower rate.
In summary, credit scores and car insurance do go hand-in-hand. There are several ways you can check your credit score, but be careful. Sometimes, websites on the computer might ask you to enter irrelevant information, then steal your identity. This may seem farfetched, but it is not that uncommon. Try going to the ones that are verified and trusted, such as the one linked to above. Finally, don’t be fooled by the common myth that states there is no link between your credit score and car insurance.