Car insurance is a deeply personal thing, influenced by your personal habits, preferences and individualistic features like your driving record, place of residence and even your credit score.
Many drivers are unaware of the link between their credit score and their car insurance, while some people don’t know if there is a link to start with. When your insurer takes all the components that you’ve given and they calculate your premium, your credit score is one of the most important input points.
Head of MiWay Blink, Keletso Mpisane says, “Your credit score says a lot about your financial standing and insurers want to assess your ability to keep up with the premiums over a lengthy period of time. However, that doesn't mean that if your credit score isn’t good you’d automatically be disqualified from being covered. The insurer does, however, have a right to say yes or no to you based on your credit score.”
Your credit score is an extension of you and reflects on your ability to make payments on time. If you do have a low credit score, you might pay more for your insurance because of the higher risk of insuring you.
“Along with your driving record, your credit score moves the needle considerably when it comes to your risk profile. Insurers reserve the right to either insure your car or not based on your risk profile, and should the risk to insure your car be too high, the feasibility to insure it is then looked into and this is what determines the insurer’s appetite to give you cover,” adds Mpisane.
Having a good credit score means that you have a proven track record of being financially responsible and having long-term financial relationships with companies. Insurers prefer to insure these types of clients since they are generally better insurance risks. The type of person who is responsible with their money is likely more responsible in other areas of their life as well, including looking after their assets that they insure.
To improve your credit score, you should consider the following:
Check your credit score with the right agencies so you know where you stand.
Adopt healthy spending habits and use your credit cards only when necessary, if at all.
- Manage your debt well
- Pay your accounts on time
- Talk to experts who can help you build your credit score
- For financial freedom, start looking into healthy habits that will help you improve your credit score.
PERSONAL FINANCE