And I was amazed to find out how much more you pay for bad credit. New Yorkers with exceptional credit pay about $ 1,500 per year. If your credit is very good, you spend almost $ 1,800. Those with good credit, that is, a score of 670 to 739, pay just over $ 2,100. If you have fair credit, you pay over $ 2,700. And if you have bad credit, you pay almost $ 3,800 a year for the same insurance. The researchers therefore found that people with poor credit are billed 150% more than those with exceptional credit.
âEven if you improve your credit score by just one level, you will save up to a thousand dollars, which is a savings of 28%,â said Danielle Marchell, public relations manager for The Zebra.
But is it fair to tie the price you pay to your gender, credit score, and zip code? Many consumer advocates argue this is not the case and say the practice disproportionately affects minorities. And experts and economists argue that the practice of basing prices on postal codes is particularly discriminatory.
A Consumers Federation study found that premiums for residents of predominantly black postal codes were 60% higher than in white neighborhoods.
Congress is considering legislation banning this practice. Five states have taken the lead. California, Massachusetts, Hawaii, Michigan, and more recently Washington have all made it illegal to base insurance premiums on credit scores. The Washington state insurance commissioner banned the practice in March and although lawmakers in New York have debated the fairness, or lack thereof, of charging more people with low ratings credit, no action was taken. So it pays to improve your credit score.
Here is Deanna’s Do List to improve this score:
- Apply for a higher credit limit. It sounds counterintuitive, but when you have more credit available to you than what you owe, you improve your credit utilization rate, which in turn improves your score.
- Pay your bills on time. If you’re late, call the credit card company and ask them to give up. Often times they will if you don’t do it often.
- Become an authorized user. If you have a slim credit history, applying to be an authorized user on your family members’ card can help your score.
- Use a secured credit card. This is especially useful if you have a bad credit history. Secure cards are guaranteed by your cash deposit. You then improve your score by paying that card bill on time.
- Keep your credit card open after you’ve paid it off. Having this line of credit helps your credit utilization rate.
It is also useful to compare insurance rates. US News has some useful information on how to compare rates.
The following sites are also useful for comparing the rates of different companies: