If you're like most people, you probably assumed that age,
driving record, and experience behind the wheel were the main
factors in determining your insurance premiums.
Silly you.
Turns out that your spendthrift ways may have an impact on
what you pay to insure your car and home, even if you're a
long-standing customer and generally an upstanding
citizen.
Telling signs in your credit report
More and more home and auto insurers rely on credit
data as a predictor of future loss, using it to decide
whether they will accept, cancel, or renew home and auto
policies, and exactly what they'll charge you for them.
What's the connection between credit and auto claims?
Industry studies show that certain financial strikes -- such
as payment delinquencies, outstanding credit card balances,
collections, foreclosures, and bankruptcies -- are linked to
the likelihood of a person filing a claim.
But even pristine customers are being hit with higher
rates. Those who have "no hits" on their credit record --
because they use cash, not plastic, for purchases -- get
squeezed because, in the eyes of the industry, they have no
credit history.
The majority of insurance companies use an
insurance-specific risk scoring system to determine whether
to do business with you and at what rate. Many use that data
in tandem with credit report information to set rates.
However, some states do not allow insurers to use credit to
make business decisions at all. (To find out if your credit
is used to calculate your rates, call your insurance company
and directly ask.)
Are you ready to let your credit speak for your driving
acumen? Now you have another reason to clean up your credit.
Pull your credit reports from the three major credit
reporting agencies at annualcreditreport.com and review them
closely for accuracy.
Make any needed repairsso there are no surprises come
home or auto insurance policy renewal time.
More Motley Fool tips on cleaning up your
credit:
Boost Your Score In Months
How to Fix Credit Boo-Boos
How-To Guide: Reduce Your Debt
This article was originally published as
Credit Dings Bring Insurance Woeson
Fool.com
Copyright 2009 The Motley Fool, LLC. All rights
reserved.
|