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Consumer
Drivers who are good borrowers can save
MADISON, Wis. (6/2911)--Want a new car free of charge? Sounds like an Internet come-on. But you could save enough on car insurance over your lifetime to pay for a new vehicle, just by being a good borrower.
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Lenders use credit scores to determine the risk that individual borrowers will not repay their loans. The most commonly used number is called the FICO score. It’s calculated for each borrower from that person’s credit report, which includes information such as payment history and amounts owed. FICO scores range from 300 to 850; the national average is about 680. But roughly four of 10 drivers have scores above 750, placing them among the very best borrowers. These “elite” drivers save an average of $783 each year on car insurance premiums (carinsurance.com June 16). “That adds up big time,” says Philip Heckman, director of youth programs at the Credit Union National Association. “If you had a FICO score of 750 or more from age 25 to age 65, you’d save a total of $25,340 over the average that people with similar driving records--but lower credit scores--would pay. That means you’d save enough extra cash to get one of the cars you’d be driving during that time for free.” The carinsurance.com report also supports the importance of building a good credit history as early as possible, Heckman adds. The average car insurance premium for drivers aged 16 to 24 is $3,152. But their young adult peers with no credit file pay an extra $1,000 a year.
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