Can GEIKO Really Save You Money On Your Car Insurance?

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While it's true that all of those things your parents told you about keeping your car insurance costs low are true, they are no longer the major determining factor in how much you'll pay to stay behind the wheel.

What's the deal? Why does your car insurance company care how much you charged on your MasterCard? Studies show that certain money missteps, like payment delinquencies, outstanding credit card balances, collections, foreclosures, and bankruptcies are linked to the likelihood of a person filing a claim. And when people file claims, insurance companies loose money.

Often students will come up to me after a presentation and ask the sort of things they're too embarrassed to ask when I open the floor to questions. Recently a student came up to me with a letter she'd gotten from an insurance company in response to an inquiry about switching her service.

Here's what it said, "As a result of your recent rate quote, we obtained information about you from the consumer reporting agency listed below. That information was used in combination with other factors to determine the rate that you were provided."

It went on, "Since we may have been able to offer you a lower rate had your credit report been more favorable, we treat our decision as an adverse action under the Fair Credit Reporting Act."

It gave her the ways she could contact the credit reporting agency to get a copy of her credit report and highlighted the things that were the "least favorable" and wished her well in her quest for car insurance.

She, like so many other 20-somethings and even adults, had no idea that her spending habits, bill paying frequency and credit card use had anything to do with how much she paid for car insurance.

I encouraged her to check out her credit report and see where she needed to make some changes, get to work in cleaning things up and paying her bills on time; then to re-apply in a couple of months which is essentially all that can be done.

If you ever wondered where the old adage, "The rich get richer and the poor get poorer" came from this is a classic example.

She obviously couldn't afford to pay higher rates with all of the bills she was already struggling to pay, but because she hadn't paid her bills on time and had too much debt; they were charging her a "risk rate" because of it!

It's ironic that GEICO has those wonderfully ridiculous commercials where people set-up you up only to tell you that they just saved a bunch of money on their car insurance; the not so funny truth is regardless of the company - having a good driving record but bad credit score will most definitely not save you any money on your car insurance.

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