How can your credit affect your monthly payment?

How can your credit affect your monthly payment

Credit affect your monthly payment: Many car insurance companies take your credit information into account to deduct the insurance premium that you will have to pay. Therefore, if you are looking for new car insurance, keep in mind that they will review your credit history. Below we explain how and why they do this.

Memorize the picture above, if you have 15 seconds to learn how credit works. It shows the most important elements that make up the number that summarizes the US credit reporting system and decides if you can get approved for a credit card or a loan, your credit rating.

The keys to a great credit score are paying your bills on time, obtaining a mixture of accounts (credit cards and loans), and maintaining those accounts in good standing for several years.

However, have you ever wondered: How can credit work? Do you require a credit file?

How can your credit affect your monthly payment?

The credit history helps banks avoid lending money to clients that have a history of not paying their debts or that are overextended.

Banking was a really personal experience. If you wanted to borrow money, you would have to walk into a bank and convince a loan officer to provide the loan to you. You would have had to show evidence of personal references, employment and, quite possibly who may vouch for your character.

Back then all lending was procured, which means that you would want to put up collateral so as to take the loan out. The case of a loan is a home mortgage.

Since that time, unsecured lending has been made by the development of credit cards as a convenient purchasing tool. And even lending can be profitable for banks, it is also risky since there’s no security for the lender to repossess if the debtor does not pay the loan back.

Because of this, the credit report system was made to provide banks a source of information.



The method that car insurers use to determine insurance rates is known as the “Insurance Credit Score“. Thus, they predict through statistical techniques and processes the consumer’s probability of having higher or lower losses in advance.

These are some of the aspects verified by the insurance companies to determine your credit score:

  • Public Records:  Here bank statements, collections, seizures, foreclosures, accusations, etc. are taken into account.
  • History of delayed payments:  The amount and regularity of delayed payments are reviewed, as well as the time elapsed between the due date and the payment made.
  • Credit history time:  The time taken by the consumer within the credit system is considered.
  • Credit requests:  The number of times you have applied for new credit, mortgage loans, utility accounts and credit cards are also included here.
  • Number of open credit lines:  The number of credit cards held by the consumer, whether used or not, is considered.
  • Types of credits in use:  The type of credit cards will be observed, whether they are from recognized companies, stores, or loans from financial companies.
  • Available credit:  Here your debits are compared in relation to the credit you have available.

It is important to clarify that the credit score for car insurance may vary depending on the insurance company you choose. All use different factors to determine your monthly payment, as has already been said. For these reasons, it is difficult to define what could be a good or adequate credit rating. Normally a favorable score will mean cheaper premiums.


The insurance agent, or the company, are not required to tell you what your credit score is. Even, they may not know it. The information they most take into account is whether your score qualifies for a certain fee or policy. Some car insurers will offer better rates according to the different rating levels.

If you consider that your credit report has incorrect information, you should contact the credit bureau and establish a complaint. With the error report in the procedures, it must investigate and give you an answer in 30 days. You can ask this company to send a correction notice to the auto insurer, or credit company that has analyzed your file in the last 6 months. Once the errors are corrected, it is advisable to request a copy of your credit report several months later, to make sure that the incorrect information has been rectified.

The three national credit bureaus in the US are:

How can your credit affect your monthly payment
How can your credit affect your monthly payment

We suggest, in case you are reporting an error, not patiently wait for the bureau to contact the auto insurance company. Go to the insurance company immediately and ask if the mistake will affect your insurance situation. If the error is large, tell your company that you are arranging the information and ask if they could wait for it to be corrected, and then consider your credit report. Small errors may not affect your credit score much. If they are notable, then it is possible that they make a significant difference in the premium that you will have to pay.

Some insurance companies do not adjust the premium amount until the credit score has been corrected. Therefore, you should never stop complaining in these cases.
If you have taken into account the steps to improve your credit score, you must require your insurance company to re-evaluate and renew your credit situation.

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