What's My FICO Score Got to Do with My Car Insurance?

Every time you use your credit card you're affecting your credit score.

What's My FICO Score Got to Do with My Car Insurance?

Do you ever get a feeling like you're being watched? Like there's something floating over your shoulder, always just out of sight but impacting everything you do? You might not be as paranoid as everyone thinks you are. You might just be thinking about your credit score!

Your credit score is a three digit number that used to be all but invisible to everyone but mortgage lenders and car dealers. Now, your FICO (Fair Isaac & Co.) score is checked by:

· Banks

· Lenders

· Employers

· Credit Providers (such as VISA or Mastercard)

· Auto dealers

· And it goes on, and on, and on…

Your FICO score is going to have an effect on everything from your home to your job to your ability to buy that 911 Carrera 4S you've been dreaming of. It's also going to play a small but important role in determining how much you're going to be expected to pay for your car insurance.

Wait. What does your ability to pay your bills have to do with your car insurance? Aside from giving your insurance provider a pretty good idea of how much trouble they're going to have getting you to pay your monthly premiums, it also helps them make an educated guess about the number and type of insurance claims they can expect you to file.

See, when it comes to your FICO score you're trapped in the same bubble of insurance prejudice as teen drivers, musicians, artists and people who drive sporty European coupes. Statistically, if you have a low credit score you're more likely to be involved in an accident. It's a type of "reflection of responsibility" thing. If you're a responsible, bill paying citizen when you're away from your car then your insurance provider assumes you're going to be a responsible, law abiding citizen behind the wheel. Responsible drivers have fewer accidents, file fewer insurance claims and (drum roll please)…pay lower car insurance premiums!

Your FICO score is determined by a number of factors that credit reporting agencies weigh using a complex algorithm that Einstein wouldn't have

understood and would take way too long to explain here! Many of these factors seem about as important as deciding which direction you're going to turn your backyard trash cans to most of us, but are considered extremely significant to lenders.

For example, did you know that a single late credit card payment could impact your credit score?

High balances on your credit cards, multiple loans, a history of delinquent payments and bankruptcy are all going to be weighed and measured before the credit reporting agency hands down their three digit verdict that's going to determine your reliability, your employability and the amount of money you pay each year for your car insurance.

The good news is that it doesn't take much to raise your FICO score and lower your car insurance premiums. Nothing stays on your credit report longer than five to seven years, and the farther you get away from your fiscal offense the higher your credit score is going to be; for example, a late credit card payment three years ago is going to have much less influence on your FICO score than filing bankruptcy over the summer. Stay on top of your bills, keep 2 to 3 credit cards with low balances and don't borrow money unless you have to. You'll be surprised at how far a good FICO score will help you go.