Credit Score Can Impact Insurance Rates
Your credit score impacts many elements of your life, but did you know that it can also impact your insurance premiums? If you answered no, you are just like two-thirds of consumers surveyed by the Government Accountability Office. According to Consumer Reports, auto insurers will look at your credit score in order to determine the likelihood that you will file a claim. If they feel your credit score is not up to their standards, they could charge you more, even if you have never been in an accident before. Consumer Reports estimates that a poor credit score could increase your insurance premium by as much as $1,301 on average.
How Do Insurance Companies Compute A Score?
According to Bankrate, insurers compute a score for you between 300 and 997 based upon your claims history and credit components. Those who score 700 and above are considered to have good credit scores, and those who score above 800 are considered to have great scores. So the lower your score is, the higher you will pay in insurance premiums. Consumer Reports states that the average difference paid by drivers with a good score compared to drivers with the best score is $214. To see individual Florida statistics, click here.
Your credit score can influence other types of insurance rates including:
- Home Insurance: Bankrate advises that people with fair credit on average pay 32% more for homeowners insurance, and those with poor credit pay nearly two times more than people with excellent credit.
- Health Insurance: The good news is that health insurers won’t take too hard of a look at your credit score. However, they are interested in knowing if you pay your bills, as this is a good indication on if you will pay your premiums. Bankrate states that research has shown there is a correlation between your physical and financial health. Bankrate concludes, “Those who fail to take care of their money pose a greater risk to themselves (and hence, their health insurer) than those who do.”
- Life Insurance: Some life insurance companies will lower your rate if you prove to be a responsible borrower, according to Bankrate. If you improve your finances in the future, it isn’t a bad idea to ask your life insurance provider to re-rate you. As previously stated, good financial health can be correlated to good physical health.
How To Improve Your Credit Score
There are many ways that you can improve your credit score:
- Pay your bills on time
- Use your credit card for routine purchases
- Sign up for BillPayer to help you better manage your finances. With BillPayer you can set up automatic payments in order to avoid late fees.
- Make frequent payments. Try to make weekly or bi-weekly payments in order to build your credit faster.
- For more tips on how to improve your credit score, click here.
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