Credit Scores and Your Insurance Rates
In the good
old days, credit reports were used in the insurance industry only
for rating homeowner's insurance premiums. Over the past few
years, credit scores have taken a much larger role in the underwriting of
insurance. Now, credit scores affect most Property & Casualty
insurance, such as auto, motorcycle, and commercial insurance. Even if
you haven't had a ticket, accident, or claim in the past three years, you could
be paying high risk premiums because of your credit score. How did this happen? Credit reporting agencies and
insurance companies ran statistics and determined that people rated as
financially responsible are less likely to file claims against their
insurer.
Different
insurance companies have different credit guidelines, so one company could label
a person as an "unacceptable risk" and another company could label the
same person as a "superior risk". There are very few preferred risk auto
insurance companies that do not use credit scoring to underwrite insurance. Even
the number of high risk insurers that do not use credit scoring is quickly
diminishing (Note: high risk companies don't decline applicants based on credit,
but credit rating does affect the premium).
Credit Factors That Can
Affect Your Rate
| Bankruptcy | Foreclosure |
| Reposession | Judgements |
| Collection Accounts | Late Payments |
| High Credit Card Balances |
Too Many Credit Inquiries |
| Insufficient Credit History |
Tax Liens |
