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Questions about credit history

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I got my own auto insurance policy about a year ago (I used to be under my parents since it was cheaper) and I remember them sending me a letter saying that my premium is higher because of my credit history and the amount of debt I have. I'm about $18k in debt due to school loans and another couple of thousand from my credit card. I was not aware of the fact that it would actually affect how much I'm paying for my car insurance. I always thought that it was based on your driving record. So does this mean that my premium will go down once my debt has been cleared??


Also, about one's credit history . . . it is to my knowledge that as long as you make the min payment every month, that it would not affect your credit history. Is this also true? I also have a habit of signing up for credit cards because of promotions and then cancelling them after about a year or two, does that affect my credit history as well?

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The fact that insurance companies check credit is very hidden and under the table.


You are better off if you can to stay on an independent policy but with the same insurance company with the rest of your family.


That way you get a loyalty discount.


You can also get student, professional, if you park your car in a garage, have a car alarm installed discounts.


Yes, cancelling credit cards immediately affects your credit, I am not sure why, but I have seen that to be the case.


You are better off opening a very dependable card and be sure to pay your payments on time every statement.


Hugs, Rose

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Are you in the US? If you're not in the US, this probably will not apply to you. You'll need to do some research on credit reporting/scoring for the country where you live.


If you are in the US, here's some info about your credit report and FICO score you might find useful. Someone else was asking about similar stuff a few days ago, so I just copied my post from that thread:

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I work for the largest insurance company in the us. A person's credit and driving record are taken into account when establishing a rate of premium.

Studys have proven that those with good credit are more likely to be careful drivers and are also more likely to pay their premiums on time. That is why your credit history effects your insurance premium.


Yes, when your credit gets cleared up and as long as your driving record remains clear you should expect a decrease in your insurance premiums.


Making the minimum payment does not effect your credit badly, but it doesn't help it either.

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From what I know, your credit is affected when you're carrying a large balance on your card for a while...minimum payments don't really make that amount go down (in fact, often it's not enough to even keep it from going up!!!), so in a way, they do affect your credit score, just not directly. A good plan is to pay double the minimum...and your debt will really begin to decrease.


And yes, credit card hopping is generally a bad sign, since you may be applying for other cards just to transfer a balance and delay paying it off. I'm no expert, but I think it's a good idea to have a "main" credit card (try to find one with a low rate and/or good benefits), and have no more than two or three other ones that provide you with specific benefits (a card to your favorite store, not every store at the mall, for example).

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Hey Babypink61,


A little history about me so you can see that I have experience in this field. I was originally trained as a loan officer many moons ago and have kept up to date with current lending underwritting guidelines. In my work life it helps me find qualified buyers and mitigates any money issues.


In regards to credit card debt it's better to maintain a balance of 25% of the available credit. This is due to what we call debt ratios in finance. Any underwritter, banks and insurers, see this as a critical tell all sign for financial wellbeing.


The best way to increase your FICO is to lower your credit card debt to a quarter of your limits and quit playing the credit card shuffle. When you shuffle from card to card underwritters see this as living of your credit, which is the last sign before defaulting or bankruptcy. This is why credit needs to be used only for durable goods purchases and not for every day purchases. The links above are great for you to look at since it's the best site to explain exactly how credit works.


Now for the insurance part. My family, clients, employees, friends and me have all switched to the lowest insurer I've ever found. You may want to check them out link removed for a quote. The application process is a bit rigorous but they offer the best and lowest policy I've ever know. Not many have heard of them due to the low advertising profile, yet this is why they're low and have a cult like following and word of mouth reputation.

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