You may think your credit score only affects you ability to get loans with good interest rates or credit cards with high limits and how rates. Your credit rating affects many things – including credit options, employment opportunities, renting opportunities, and even what rates you may be charged for auto and homeowner’s insurance. This may be shocking news to you, but it’s the truth.
Insurance companies have bought into the philosophy that poor credit scores indicate high risks – even for insurance purposes. Whether this link is supported by actual fact or not, that’s the link they use to determine what kind of premiums you will pay for insurance – or if they’ll even offer you insurance.
Over 90% of auto insurance companies use credit scores to determine if they will offer you auto insurance. Homeowner insurance companies are following the trend set by auto insurance companies. Often they use your credit score to determine what premium they will charge you.
According to the Insurance Information Institute, drivers who have poor credit are more likely to file claims, and the claims they file are likely to be more expensive than those filed by drivers with excellent credit. This benefits drivers with excellent credit and penalizes drivers with poor credit, who are determined to be at a higher risk of filing claims.
A good credit rating can help a driver with a less-than-perfect driving record when it comes to underwriting insurance. Just as poor credit hurts your ability to get good insurance rates, good credit can offset a mediocre driving record. That’s one more reason to keep that credit score up.
You can find out your credit score by purchasing it at www.myfico.com or on any of the three major credit bureau websites. It’s advisable to order your free credit report from all three credit bureaus every year. While you have to pay for the credit score, you don’t have to pay for the reports. Checking your credit report for inaccurate information is a wise way to spot identity theft and to protect your credit score. If you do find inaccurate information on your credit report, you should dispute the information and request it be corrected or removed from your report.
You can order copies of your credit report from www.equifax.com, www.experian.com, or www.transunion.com. You’ll want copies from all three bureaus so you can compare them and make sure all information being reported is correct.
Finding out your insurance score is not so easy. Most insurance companies will not tell customers their insurance rating score, and no law says they have to disclose what reasons they have for refusing insurance or charging high premiums. There are many factors that are considered when underwriting either an auto or a home owner’s insurance policy – anything from where you live to proximity to a fire station to how many accidents you’ve had in your lifetime to your age – the list goes on and on. Insurance companies don’t have to explain why the underwriting committee decided to offer you what they did. After all, you can always say you’re not interested in their services and check for insurance elsewhere.
