There are a number of reasons why residents of Texas should be concerned about their credit score. The higher their credit score, the less they will pay for car payments, bank loans, and interest rates on their mortgage. If a person has a good credit score, they can get a credit card and will be able to finance a variety of things. However, something that many Texas residents do not realize is the link that exists between their credit score and the amount of money they pay for auto insurance. However, there are some things which you should take note of before contacting a company like https://www.texasquotes.com for a quote.
In Texas, a person’s credit score has a direct link to what they pay for auto insurance. Therefore, a policyholder who has a lower credit rating, and especially those who have a lower income, may find themselves paying twice as much for auto insurance than individuals who have a decent income and good credit scores. It is not uncommon for a person with a low credit score to pay on average between 39 percent and 51 percent more for their auto insurance premiums. This means that in Texas a disproportionately large amount of minorities and low income residents who have low credit ratings are paying large auto insurance premiums.
Legally, auto insurance companies can use many things, including a person’s credit worthiness, when determining an individual’s policy rates for their auto insurance. Insurance companies argue that it is legitimate for them to use a person’s credit score because their credit score is one tool that shows whether or not the person is a risk. Auto insurance companies only make money if they are able to minimize risk. So then, it is only logical to charge a person who poses a bigger risk of potentially not paying their auto insurance premium more.
However, some civil rights groups in Texas feel that the practice of using one’s credit score to determine their auto insurance rates creates undue hardship on poor families and does little to reduce the overall cost of auto insurance.
Alex Winslow of Texas Watch, a consumer group that monitors issues related to insurance in Texas, feels that using a credit score to determine a person’s auto insurance rate is just an underhanded way insurance companies use to avoid providing coverage to people they don’t want to sell to. He argues that if a person misses their credit card payment a few times and as a result their credit suffers, this does not mean that the risk of them getting into an automobile accident or suffering some other catastrophic damage increases. From his standpoint, there is no correlation between the two.
On the other side of the coin, a representative from the Insurance Council of Texas says that credit scores are a reliable way to predict the risk for insurers. He argues that credit scores provide a clear picture of how people maintain their homes and how they take care of their cars. He also mentioned that just about every auto insurance company uses credit scores to one extent or another when it comes to determining rates, and they do this because it is a consistent and reliable way to mitigate future losses.
The impact that having poor credit can have on an individual’s auto insurance rate can be clearly seen when one realizes that a person who has been at fault in an accident is likely to pay the same amount for auto insurance as a person who has never had an accident yet has a poor credit score. In some instances, Texas residents with poor credit will pay more for auto insurance than individuals who have had at fault accidents.
Thankfully, the residents of Texas have a choice when it comes to selecting auto insurance. Individuals who have bad credit are encouraged to shop around and try to find an auto insurance company that will provide the best coverage at the least expensive price.