While you are young, you haven’t had a long time to build up your financial foundation. However, everyone starts early. As you create more monetary stability, and build better credit, you might see improvements in many of your financial obligations. Good credit often qualifies you for many benefits, such as better loan financing and decreased insurance premiums. This is especially true when it comes to your vehicle insurance, including motorcycle coverage. How can a stable credit score help you save on your premiums?
Younger bikers often have higher insurance risks, not to mention less credit stability. However, credit is something you can control. Therefore, if you work to improve your score, you might see your premiums decrease over the years.
A person’s credit rating or credit score is an important measure of their financial health.
If lenders, like credit card companies or the lender that financed your motorcycle, loan money to you, then they expect you to pay it back. Your reliability and ability to do so is your credit. The better you repay your debts, the better your credit in most cases.
Most lenders look at a commonly-used number, called a credit score or credit rating, to judge a person’s credit security. Credit scores vary among the companies that compile them, but most range between 300 – 850. Scores above 650 are usually considered good credit. Everyone should try to achieve good credit, even while young.
Credit’s Impact on Insurance Rates
In most cases, you will have to buy motorcycle insurance on your bike. However, you will also have to pay for it. In many cases, motorcycle insurance is even more expensive than a standard car’s insurance policy. That is because riding a motorcycle is, in general, much more dangerous than driving a car.
Therefore, it stands to reason that you want to save as much as you can on your policy. However, if you are young, and just starting out, then you might have a risk of paying more for your policy all the same. That is because your inexperience might put you at a higher risk of accidents. This might drive your rates up.
However, if you have good credit, that might actually help balance your insurance premium.
Because you have to pay for your policy, your insurer wants to know that you will pay your premium on time. If they see that you have a good credit, they might therefore judge that you will be a reliable customer. As a result, they might be able to offer you a lower policy rate.
More so, if you have a higher credit score, it is often an indicator that you can handle your own finances. Therefore, if you have a motorcycle wreck, you might be able to pay for a lot of the damage on your own. That might therefore reduce the chances that you even have to make a claim on your policy at all. As a result, your insurance risks might drop, and you might not have to pay as much as a result.
Creating Stable Credit While Young
It takes quite some time to build up good credit. The bad thing is, it often doesn’t take much to cause your score to drop. All the same, if you make responsible financial decisions, then you can likely stabilize credit long-term.
1. Avoid Debt
Almost everyone will have debt at some point in their lives. Mortgages, credit card debt, car loans and more might all count. Usually, the less debt you have, the better your credit. That’s because you show that you can repay credit allowances. Therefore, while it is okay to accumulate debt, your obligation is always to pay it back. If creditors see that you always do so, then your credit might improve.
2. Monitor New Credit
When you apply for any new line of credit, even a new credit card, then your credit score might change a bit. However, it usually recovers quickly. Still, what you don’t want to do is open multiple lines of credit all at once. This might demonstrate that you rely too much on credit, rather than on your own financial reserves. This might concern creditors, and could drop your score.
3. Keep Your Identity Secure
If a criminal or fraudster were to hijack your credit, they might cause your score to drop. For example, someone might fraudulently use your credit cards. Or, they might attempt to open accounts or take out loans in your name. This is identity theft. However, if you don’t catch it, it could cause your credit score to drop.
Therefore, you should routinely monitor your credit score. These days, many banks and creditors offer to analyze your score for free. Or, you can receive an annual score from a major credit monitoring service, like Experian® or FICO®. Doing so can help you familiarize yourself with your credit score. However, it can also let you know if any credit accounts exist that you are not aware of. Therefore, you might be able to close any troublesome accounts, and keep your credit ratings stable.