Finance and Insurance - Stuff You Need To Know
“Full coverage” will get me a new car if I crash
Your auto repair shop may thank you for having collision and comprehensive coverage, because the shop will get paid by your insurer for fixing your car. But however you define “full” coverage, it won’t equate to you getting a new car after you crash. Insurance is meant to put you back to where you were, not improve upon it, so you won’t be getting a better car than you had.
My rates will go up if I get a traffic ticket
Not always, says Matthew Neely, owner of Eco Insurance Group in Las Vegas.
Here’s how it works, Neely says: Some companies only ask for a record of an applicant’s driving history when he or she first sign up for a policy. Motor Vehicle Reports cost $3 to $28, depending on the state. “These charges can get very expensive for insurance companies, so a lot of the time the carrier will randomly select households and run the MVRs,” he says. “If you are lucky enough, the insurance company will not find out about your speeding habit. However, if you let your insurance lapse, get into an accident or change insurance carriers, the carrier will run the MVR.”
Thieves prefer new or fancy cars
Not true. Of the 10 most frequently stolen cars, the most stolen in 2012 was the 1996 Honda Accord, according to the National Insurance Crime Bureau.
The longer you are with an insurance company, the lower your rate will be
This is half true. Longevity discounts are sometimes offered to policyholders, but it doesn’t shelter them from increased costs. Most of the time, the moment you make a claim, this discount will disappear.
Four ways your driving habits could wreck your credit score
My daughter recently turned 15, and one of the first things she did on her birthday was to take an online test required to get her learner’s permit. She passed, and now she’s driving. I don’t have to lecture her on safe driving habits; she’s been doing that to me for years. And she’s more up to speed on the rules of the road than I am.But what I do have to explain is how driving may affect her credit in the future. They don’t teach that in Driver’s Ed, and it’s something most of us don’t think about until it affects us.
Here are four ways that driving can have significant, long-term impact on your credit.
Tickets and Fines
If you get a ticket for a traffic or parking violation, it shouldn’t show up on your credit reports. But if you don’t pay the fines that result, the balance may be turned over to a collection agency, and that collection account may very well show up on your credit reports. Collection accounts, regardless of the reason or the amount, can be score killers.
An auto loan can help or hurt your credit, depending on how you manage it. One of the factors that most credit scoring models look at is your “mix of credit.” In many scoring models, it makes up about 10 percent of your score. You’ll score better for this factor if you have a variety of types of credit accounts; for example, if your report lists both revolving accounts (such as credit cards) and installment accounts (such as vehicle or student loans). If you want to see how your account mix is affecting your credit, check your free Credit Report Card, which will grade you on each of the five major credit reporting factors.
In addition, if you co-sign a car loan for your child (or anyone else for that matter), their loan will likely appear on your credit reports and will be treated as your own. Even if payments are made on time, the debt can affect your credit scores.
Miss a payment, however, and your credit scores may plummet.
If you are charged with driving under the influence of alcohol or drugs, the DUI will not appear on standard credit reports. But the costs of a DUI — even for first-time offenders — are staggering, and often cost $5,000 or more. Trying to come up with the money for attorney’s fees, court costs, bail, towing, higher insurance premiums, etc., can put a strain on your budget and cause you to fall behind on other bills.
Or you may find yourself having to max out your credit cards or get a loan to pay those costs, resulting in higher balances on your credit reports. Those higher credit card balances can hurt your credit scores.
There were some 10.8 million motor vehicle accidents in 2009, according to the U.S. Census Bureau. These accidents don’t just wreck vehicles; they sometimes destroy people’s credit as well. Accidents may involve property damage that may not be covered by insurance, or large medical bills that aren’t covered in full.
Even with adequate insurance, it can take time for insurance companies to sort out who pays for what, and to pay policyholders or providers. In the meantime, it’s not unusual for medical bills to go unpaid. If medical providers aren’t paid quickly enough, they may turn those bills over to collections; again, damaging credit reports.