Did you know that your credit score affects what you pay for car and homeowners insurance? Even if you do not plan on purchasing a new car or a new house, it is important to always work on improving your credit score. Your score will be referenced in many other areas of your life, insurance rates being only one area that you might not have been aware of.
Why Credit Scores Affect Insurance Rates?
Insurance companies look at many difference factors to determine your risk level. There is a known link between credit score and insurance claims. Individuals with lower credit scores tend to file more insurance claims. With this in mind, a low score will be perceived as higher risk,..and will therefore result in a higher insurance premium.
Although credit scores are used, other factors are also important. For auto insurance, the type of vehicle you drive and your accident history weighs heavily on the insurance premium. For homeowners insurance, your claim history is important. Just as credit scores are an indication of how likely you are to file a claim, so is your history of past claims filed.
What Insurance Companies Look At Credit Scores?
Car insurance and homeowners insurance companies always review your credit score. When you review your credit report, you may actually see a score specific marked for “insurance”. The figure is different from your regular credit score. Although the credit bureaus use the same credit history to calculate insurance credit scores, the formula and scoring system is slightly different.
How Can I Improve My Insurance Credit Score
By practicing good credit behavior, all of your scores will improve accordingly. Your first priority should always be to correct any issues in your report as this may lead to a quick improvement in score. Other factors may take a little more time to complete and improve over time. Contact FIT Credit for a free evaluation of your credit report and suggestions on ways to improve your score.