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How does your credit affect your insurance?

Question: How does my credit score affect your auto insurance?

The Answer:

Studies show that consumers with below average credit scores have a higher percentage of claims and more money is paid out per claim. Higher frequency and higher payout equals higher premiums. Today, almost all insurance companies underwrite your insurance based, in part, on your credit score (commonly referred to as FICO score).

Your car insurance rates are based on driving record, claim history, age, location, car model, and credit score. You might appear to be an ideal client if you have never had a claim or a traffic ticket, but a poor credit score could cause a company to refuse, or cancel, your policy.

Underwriting for home owner insurance coverage is also affected by your credit. If your score does not meet a threshold set by the insurance company, they will either refuse to offer you a policy, or they will place you in a higher rating tier for your coverage. Of course this means that you will pay a higher premium than others with a better (higher) credit score.

There are still some companies that will issue a policy without pulling your score, but the number of companies is small. Often times, you have to shine in all other areas if the company is willing to write the policy. In other cases, the premiums are a bit higher when it is a non-underwritten policy. However, that may be your only option. One example is our instant renters insurance quote.

The good news is most of us can control our score. Controlling or improving your credit score is a great way to improve you overall insurance premium. There are steps you can take to improve your score. some will take a bit of time, but don't lose site of the big picture. In the long run, this will save you quite a bit of money.