Auto insurance companies use credit scores to determine the risk of a vehicle owner. Those with good credit scores could save money. It is always wise to work to boost your credit score. It could help reduce what you have to pay each month. But, how do you do so? Before you renew your policy, consider these tips.
Key Ways to Boost a Credit Score
Knowing where your credit is right now is your first goal. Request a free credit report from the credit bureaus. And, use a free service such as Credit Karma(R) or Mint(R) to determine what your score is. Then, apply these tips before renewing your insurance policy.
#1: Make Every Payment on Time
The most important step in improving credit is to make consistent payments. Applying a payment every month before the due date helps ensure your creditors report your reliable payment history. To avoid missing a payment, set up automatic payments. Most lenders allow this. It applies the amount you want every month on the day you choose automatically. Or, if you write checks, keep a notebook of when you paid each bill, each month.
#2: Avoid Applying for Too Much Credit
Applying for numerous loans can lower your credit score. It shows lenders you’re desperate for credit. Instead, aim to apply for new loans only one time every two to three months, or less. You will notice these on your credit report as hard inquiries.
#3: Work to Pay Down What You Owe
Reducing your debt is important. Aim for owing no more than 30 percent of your balance on each account you have. To make this happen, consider these tips:
- Don’t use your credit cards for purchases. Instead, use a cash system to pay for your bills and to make purchases over the next month.
- Apply extra payments to your account. For example, if you receive a tax return, bonus, or a gift from someone, use it to pay down your credit.
- Aim to double, at least, the minimum payment owed. You may need to create a budget to help you do so, but paying the minimum payment extends your debt for years.
Your auto insurance company may not need to know these details about debt. But, they do want to know you are a responsible borrower. As your credit score improves, be sure to let your car insurance agent know. It could help you secure a lower rate.
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