Everyone knows that their FICO score controls their ability to get credit and the interest rate that they will have to pay. Many do not realize that the same score is used to set their car insurance rates nor do they understand how much more they could pay is they have bad credit.
Insurance companies use a specialized credit score called the C.L.U.E. Report. It is slightly different than a regular credit score, but is handled by the same companies. You may be wondering how much your premiums can be affected by your C.L.U.E score. ”A consumer with bad credit is going to pay 20 to 50 percent more in auto insurance premiums than a person who has good credit,” said Clarence Smith, former assistant vice-president at Conning & Co.
Even worse, if your credit changes, so may your car insurance premiums. You do not even have to be in an accident. ”I’ve seen instances where people have lost a job and have been unable to pay for car insurance and had it canceled,” said Mike Sullivan, Director of Education for Take Charge America. ”Then when they went to get insurance again, their rates increased by 25 percent or more, even though their driving record was the same. When asking why, they get the response that they now are a greater risk.”
The practice is questionable at best. California, Massachusetts and Hawaii have banned the use of credit scores in car insurance quote calculations. If you want to find out what your C.L.U.E score is you can visit truecredit.com. There is a fee involved.