How is your credit score related to insurance?
Insurance companies need to know whether you have paid your bills on time. Most insurance companies today base the cost of your insurance on your credit score. Your credit history reveals a lot about how you are with payments and it also helps judge whether you are a potential buyer.
Anyone who maintains a credit score above 700 has a good background. If you miss as little as 2 payments on your credit cards means you have the risk of paying premiums almost double the amount you would otherwise pay. Your insurance company will not consider any lapse in payment even if you have been with this company for long. A low credit score could mean that you have to pay higher insurance premiums.
Many of you may wonder what your credit rating has got to do with the insurance policy you have planned to buy. But the fact is, insurance companies today feel that if you are responsible with your money, only then are you going to be responsible on the road. Companies have well figured out that how you manage your credit score reflects the way you will manage your car on the road, the way you pay premiums and the way you manage your loans. Other factors may include, your claims history and motor vehicle records. If you have a bad credit score, then remember that it is never too late to improve your credit score. Here are 3 easy and simple steps to follow:
- Start making payments on time
- Do not open unnecessary new charge accounts
- Get a free credit report annually to see your own performance
What information does your credit report provide?
- Identification: Contains your name, your complete address, telephone number, social security number and date of birth.
- Government records: Contains foreclosures, collections, tax liens, judgment, wage garnishment and bankruptcies.
- Credit history: Contains history of how payment (if any) was taken care of in case of any obligations to banks, finance companies, retail stores and mortgage companies.
- Inquiries: Gives information on which authorized party has received a copy of the consumer’s credit report within the past 2 years. It also provides a list of companies who have received information on various consumers in order to offer them credit or other promotions.
Whether you will find insurance from a good provider, whether the premiums you will pay will be according to what you can pay largely depends on your credit score. Having good credit score will definitely prove advantageous when you are looking forward to buying an insurance policy. But having bad credit score may affect your premiums. If you have a bad credit score, don’t worry. You can still improve it but remember having good credit score is really important if you want to get a fair deal with your insurance policy.
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