Your credit report is like your financial report card. It tells creditors and other interested parties how reliable you are when it comes to borrowing money. Do you have a lot of debt? Do you pay your bills on time? Your credit history will answer these questions and more.

Now your auto insurance company isn�t really concerned with how likely you are to pay your insurance premium on time. After all, charging you more money for having poor credit would not encourage timely premium payments. Rather, they are judging the likelihood of you getting in an accident and filing a claim.

Drivers with good credit are statistically proven to be safer drivers. Your insurer will view your good credit as an indication you�ll cost the company less in claim payouts (or your bad credit as a sign you�ll be an expensive customer). Even if you have an excellent driving record, bad credit could make your auto insurance much more expensive.

This means that one of the most important steps in buying a new car, in addition to getting quality auto insurance, is budgeting for the big purchase before you hit the car lot. You must be sure of your price range and your ability to make the monthly payments, otherwise you will face nasty consequences that extend beyond just your credit report.