Articles & News About Your Credit

Being Aware of the Additional Costs of Credit Dings

Nobody wants blemishes or dings on their credit report. It just does not make good business sense, even for Joe Average Consumer and his household budget. When you start getting dings on your credit report due to late payments and overdue accounts, now your existing accounts and any new accounts you may want to open, such as a loan for a new car, look at you as a higher credit risk. That pushes you up into a higher interest rate on that loan.

And if you have enough dings on your credit report, your existing accounts can also raise the interest rate that you are paying. You may not realize it, but your existing accounts probably do a credit check on you every year or every couple of years to make sure you are still the credit risk they thought you were when they opened your account. If you are a significantly worse credit risk, you may get a letter from them stating that they have decided to raise your interest rate to cover their additional perceived risk.

Note that I'm talking about "dings" on your credit report. Hopefully you don't have a full-fledged fender bender like an account being charged off, or a total head-on like a bankruptcy. You can still work with those, but you have just made your task quite a bit tougher, both in terms of time and in terms of your efforts to straighten it out.

While it's bad enough to have some dings on your credit report because of some unexpected things that popped up, there is an additional cost there, in real dollars, that most people aren't aware of. Those credit blemishes can also raise your car insurance rates.

The auto insurance industry is now starting to use your credit score as one of the determining factors when they establish the rate you will be required to pay for car insurance. If you do not use credit very much, and even if you don't have any blemishes, your credit score might be too low to make an accurate determination of what kind of credit risk you are, so your car insurance rates might be quoted higher.

The theory used by the car insurance companies is that your credit score is a direct reflection on your character and your credit worthiness, and their studies allegedly indicate that someone with a lower credit score is a higher risk driver. Interestingly enough, the Federal Trade Commission also supports those studies and findings with studies of its own, which indicate that credit-based insurance scores are a pretty accurate predictor of the number and cost of claims. At this time, the top 14 car insurance companies utilize the consumer's credit score to establish rate premiums.

What can you do about it? A lot, although most consumers are not aware of what they can and should be doing on a regular basis. The bottom line is that you need to raise your credit score. We're not talking some illegal activity here or some scam artist. The fact is that most credit reports contain errors, and the more errors you have, the worse your credit score will be. So when you add in a couple dings, your score is reflected as worse than it really is. It is your right to have an accurate credit report, but if you don't take action to get it corrected, nobody else will either.

For more insights and additional information on how to Raise Your Credit Score please visit our web site at http://www.credit-help-center.com

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