Why Is My Credit Score an Issue When Buying Auto or Property Insurance?
Based on the collection, analysis, interpretation of large amounts of data many personal and business property and casualty insurance companies believe that as a group, consumers who show more financial responsibility have fewer and less costly losses, and therefore, should pay less for their insurance.
On the other hand they believe that as a group, consumers who show less financial responsibility have more and costlier losses, and therefore, should pay more for their insurance.
So insurance companies went to a credit scoring/ insurance scoring model to rate personal auto, business auto and property insurance policies.
Financial responsibility scoring is primarily used when determining a rate for personal auto or property insurance, although some company's do use a financial responsibility model for scoring business auto insurance policies as well.
Here are the factors that many but not all financial responsibility models include: Do you pay your bills on time, how long have you been using credit, your balance on credit card accounts or open charge accounts, number of open accounts and also the number of inquires and any foreclosure or bankruptcy activity? Also keep in mind that your insurance score is different than your credit score.
Based on my experience the groups that obtain the best rates based on credit scoring are: Mature or elderly adults- Many consumers that fall into this group don't use their credit much anymore to buy things and if they own a home there may not be a mortgage or a low mortgage loan amount owing.
Consumers with older vehicles- Next to their mortgage many consumers next largest debt on their credit file is a car loan.
If you have successfully paid a car off over time this gives you history, it demonstrates your ability to handle a debt over a period of 36 to 60 months.
Female spouses- If a couple owns a home and cars in many cases a good bit of the debt is in the husband's name.
Even if the husband pays everything on time there are more inquires, higher balances on his credit file, which could contribute to a lower score.
If you fall into the "Needs Help" credit category all is not lost.
Here are some things you can do to lower your auto and or home insurance cost.
Work within the system, keep your driving record clean and your chances of paying a lower insurance rate will become a reality.
For more information about insurance scores, you may want to look at the Insurance Information Institute Web site at www.
iii.
org.
The Insurance Information Institute is not affiliated with an insurance company or agency and can provide you with more detailed information about how insurance scores are used.
On the other hand they believe that as a group, consumers who show less financial responsibility have more and costlier losses, and therefore, should pay more for their insurance.
So insurance companies went to a credit scoring/ insurance scoring model to rate personal auto, business auto and property insurance policies.
Financial responsibility scoring is primarily used when determining a rate for personal auto or property insurance, although some company's do use a financial responsibility model for scoring business auto insurance policies as well.
Here are the factors that many but not all financial responsibility models include: Do you pay your bills on time, how long have you been using credit, your balance on credit card accounts or open charge accounts, number of open accounts and also the number of inquires and any foreclosure or bankruptcy activity? Also keep in mind that your insurance score is different than your credit score.
Based on my experience the groups that obtain the best rates based on credit scoring are: Mature or elderly adults- Many consumers that fall into this group don't use their credit much anymore to buy things and if they own a home there may not be a mortgage or a low mortgage loan amount owing.
Consumers with older vehicles- Next to their mortgage many consumers next largest debt on their credit file is a car loan.
If you have successfully paid a car off over time this gives you history, it demonstrates your ability to handle a debt over a period of 36 to 60 months.
Female spouses- If a couple owns a home and cars in many cases a good bit of the debt is in the husband's name.
Even if the husband pays everything on time there are more inquires, higher balances on his credit file, which could contribute to a lower score.
If you fall into the "Needs Help" credit category all is not lost.
Here are some things you can do to lower your auto and or home insurance cost.
- If you are married use the spouse that has the best credit, fewer inquires and fewer items on the credit report.
You really can't determine this.
Let the agent or insurance company tell you which spouse would get the best rate based on financial responsibility - Scrub your credit report for mistakes.
Consumers can get a free copy of their credit report from each of the three national credit bureaus (Equifax, Experian, and Trans Union) once every 12 months.
The 3 major bureaus are listed below.
Correct any errors on all of your reports. - Equifax 800-685-1111)
- Experian 888-397-3742)
- Trans Union 800-888-4213)
- Stay current on bills even if you pay the minimum amount
- Keep your credit inquires to a minimum.
- Choose an insurance company that uses personal agents, instead of a call center or a 800 number customer service rep.
Agents have more flexibility in how they can help you.
Work within the system, keep your driving record clean and your chances of paying a lower insurance rate will become a reality.
For more information about insurance scores, you may want to look at the Insurance Information Institute Web site at www.
iii.
org.
The Insurance Information Institute is not affiliated with an insurance company or agency and can provide you with more detailed information about how insurance scores are used.
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