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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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