How to Improve Your Credit Score to Get Lower Prices on Auto Insurance

Credit scores matter to auto insurance companies. They can shed some light on what type of driver you are. If you have a lower credit score, it may mean you will pay more for the car insurance coverage you need. This is something you can improve, though. Doing so improves your overall financial health. Here’s a look at a few ways to boost your score before you switch your car insurance plan. Could it help you save money?

Know Your Credit Report

A good place to start is with a look at your credit report. Ensure it is accurate. There are free sites to use for this, such as Credit Karma and Mint. However, you can get a free copy of your credit report from each of the three credit bureaus one time a year.

To access that free copy, visit AnnualCreditReport.com. There’s no cost or sign up required. Verify the information there is accurate. Report any mistakes.

Make Payments on Time

The most important way to boost your credit score is to keep making payments on time. One easy way to improve your payment history is to use automatic payments.

Log into each one of your credit lenders. Set up automatic payments. This way, it automatically debits your account. There is no risk of missing a payment.

Pay Down Your Debt

The ideal credit limit to usage ratio is 30 percent. That means lenders consider you a safe and good borrower if your credit usage is below 30 percent of the credit limit. For every $100 worth of credit limit, try to keep your balance under $30. The better this ratio is, the better your credit score. Work to pay down, or off, your debt to see it rise.

You Need to Use Credit

To have a good credit score, you need to use credit. Here are a few tips for doing so wisely.

• If you have no credit history, open a secured credit card that carries no risk to lenders. Use it for gas each month. Pay it off in full every month.
• Open a store credit card. These may be a bit easier to qualify for initially. Charge to it once a month but pay off the balance every time.
• Use your credit card to pay your utilities. Then, pay off the balance every month. This shows responsible usage.

Taking these steps can show auto insurance lenders you are a safe borrower. That may mean lower car insurance costs.