How Credit Scores Affect Insurance Rates

how credit scores affect your insurance ratesBack in the good old days insurance rates were determined by the driver’s age, sex, driving record and the type of car.  At that time you paid for homeowners insurance based on the type of construction and you got a big discount if you lived within three miles of a fire station.

Those are still considerations today, but something else plays a bigger role in your rates than you might think – credit score.

According to

“A consumer with a bad credit score is going to pay 20 to 50 percent more in auto insurance premiums than a consumer with good credit. … On the other hand, having sparkling credit could land you lower insurance rates so you should shop around if you’ve got a glowing report.” [emphasis added]

Whether or not you think insurance companies should use credit score to determine risk and insurance rates, it’s a fact of life.

So what can you, as a consumer, do to get the lowest insurance rates?

If your credit is good, find out from your agent if you’re getting the best rates. If not, shop around. For you, it’s a buyer’s market.

However, if your credit is less than stellar and you’re currently insured, your best strategy may be to stay where you are while you improve your credit score.

If you’re denied insurance because of poor credit, or if you think your rates are higher than they should be because of your credit, ask what factors were considered and how you can improve your application.  Contact Insurance Land.  We can help.

Under the Fair Credit Reporting Act, you’re entitled to know who supplied the information to your insurance company and what it said. Remember that the credit reporting agency can tell you what they reported, but only the insurance company can tell you why they turned you down.

  1. Ask the insurance company for the name, address and phone number of the credit agency that reported on you.
  2. Contact them for a copy of the report. If you request it within 60 days of when your insurance was turned down, they must provide it to you free of charge.
  3. Once you receive the credit report, review it carefully. If there are any inaccuracies, ask the agency to fix them.  The FTC (Federal Trade Commission) publishes guidelines on how to challenge credit report errors.

Sometimes a credit problem is fairly easy to fix. For example, if you are too near your credit limit on a credit card, pay down as much as you can, then re-apply for the insurance.

If you’ve had a history of good credit, but developed problems recently because of a specific situation – job loss or illness, for example – let the insurance company know about those circumstances.

If your credit is in the toilet, you’ll need to take drastic action. The FTC’s page on How to Repair Your Credit is a good place to start.

We live in a credit-driven society. Tying credit to insurance rates is just one more example of why it’s important to maintain a good credit score. In the long run, good credit will save you money.

If you’d like to re-evaluate your insurance, our experienced, licensed agents will be happy to provide a no-obligation consultation. Call us today at 407-330-3111.