For those people looking for a way to reduce their car insurance, home insurance or other insurance premium costs, you may want to look at your credit report. Your credit report is not often thought of as having a link to your car insurance needs, but it is, in fact, one of the biggest and best tools for you to use to get a lower cost. The reason for this is your insurance provider’s need to know how risky it is to work with you. Some companies are using credit reports to determine risk factors related to car insurance.

What’s The Link?

What could be the link between credit scores and insurance premiums? Many car insurance providers, home insurance providers and even some other insurance companies use credit scores to determine how much of a risk you are to them. If you are a new customer with a company, for example, the company will likely pull a credit report on you to determine what type of a borrower you are. Here’s why.

• If you have a higher credit score, research and evidence points to you having, most likely, smaller car insurance plans.
• If you have a lower credit score, evidence shows that you are more prone to having more car insurance claims.

The two may not seem like they should be linked, but in fact they are. This information on the link between credit history and claim filing is one based on research from the various car insurance companies. They looked back at drivers over a period of time and found a link between these two factors. In short, those drivers who have good credit scores are also better drivers.

What You Can Do

How will your credit report affect your application with an insurance company? The fact is, that depends on what is on your credit report. If you have not done so yet, get a free copy of your credit report at AnnualCreditReport.com (the only, government-authorized site for accessing your free credit report from each of the three largest credit bureaus.) Then, ensure it is up to date and accurate.

It is also a good idea to be a good credit user. Make your payments on time. Ensure you pay down debt and live within your means. By doing these things, you not only boost your ability to manage your credit debt, but you also may end up with a lower car insurance premium or house insurance premium as a direct result. If your credit score goes up, do not expect your car insurance company to automatically reduce your premium, but you can call the insurer and ask for a better rate.

If you are tired of paying a high car insurance premium, as if anyone isn’t, it may be time to choose a different type of plan, a pay as you drive car insurance plan. This type of plan can be helpful because it focuses specifically on charging you less, if you drive less.

How it Works

The pay as you drive car insurance plan is different from one provider to the next. However, these plans can be outstanding in terms of what they can offer, if you fit the profile of a driver. Here’s how they work. You install a device in your vehicle. This device does not interfere with your driving ability, but it helps to monitor your driving. It watches how much you drive for example. In addition, it monitors how you drive, specifically in the areas of how you accelerate and how you brake.

How You Benefit

If you are one of the people that will benefit from this plan, you will end up paying less overall. To get that lower cost, you need to know what the plan is looking for. In this type of car insurance plan, the fewer miles you drive, the lower your premium will be. The safer you drive (in terms of braking and accelerating for example) the lower your premium is. Of course, this also helps you to save on gas (since accelerating slower and braking slowly help your vehicle to use less gas.)

Where You Can Get Them

Not all car insurance companies actually offer this type of plan, but those that do are becoming more popular. More people are looking for ways to save on car insurance and this is helping to make pay as you drive plans more in demand by drivers. Some of the larger insurance companies are not offering these plans. However, note that this type of plan is not available in all states just yet. To find out if your state has insurance providers offering pay as you drive car insurance plans, contact your state’s insurance regulators to ask. You can also get quotes for this type of plan online.

Why should you bother with pay as you drive car insurance plans? The answer is simple. These plans can save you up to 30 percent off your current premium costs if you drive under 15,000 miles per year and drive safely. That is a huge savings when it comes to car insurance. Virtually anyone will benefit from it, but not everyone will benefit from this type of plan. Therefore, talk to your insurance provider to find out if you qualify.