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How Your Credit Affects Your
Insurance Rates
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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 and Casualty lines of insurance, such as
auto, motorcycle, and commercial insurance (in most
states). Even if you've never had a ticket, accident or
claim, 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
insurers. |
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Different insurance companies have
different credit guidelines, so one company could label a
person as an "unacceptable risk" and another company could
label that person 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 don't use credit scoring is quickly diminishing.
(Note: high risk companies do not decline applicants based on
credit, but credit rating does affect the
premium.)
Credit Factors That Could
Affect Your Insurance Premium
| Bankruptcy |
Foreclosure |
| Reposession |
Judgements |
| Collection Accounts |
Late Payments |
| High Credit Card Balances |
Too Many Credit Inquiries |
| Insufficient Credit History |
Tax Liens |
Since this article was written, credit scoring for auto
insurance has been outlawed in several states. Check with your state insurance
department to see if credit scoring is used in your state. For more info on
insurance credit scoring, visit InsuranceScored.Com.
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