How Credit Affects Your Insurance Rates

Before I became an insurance agent, I had no idea that credit could affect my insurance rates.  I guess it's not something most people sit around and think about or even consider, but your credit can be a major factor in determining your rates.  I was given permission to use the following information by my company that you might find interesting. 
How can my credit score benefit me?

The way that you manage your credit is very important. Your credit helps determine such items as your home mortgage interest rate and auto insurance rates. A credit-based insurance score helps insurers to quote the fairest, most appropriate rate for every customer.

If my bank says I have good credit, does that mean I have a good insurance score?

Insurance companies do not look at credit the same way financial institutions do. Insurers only consider items from your credit report that are relevant to loss potential. A financial institution uses credit to assess credit-worthiness.

What factors do insurers consider when determining my insurance price?

Some of the rating factors that influence your premium include:

* age or driving experience
* how your vehicle is used
* driving history
* claims history
* make and model of your vehicle(s)
* geographic location

How does credit affect the price of insurance?
 Most insurers use a credit-based insurance score to predict insurance losses.

Studies show that considering credit creates a more accurate rate. Credit history is being used by a vast majority of insurers today. By predicting potential losses better, insurers can provide a more appropriate rate for each customer.

How do insurers determine this credit-based insurance score?
 Insurers use many factors to determine your score. Some of the more common factors are:

* Payment history (delinquencies or late payments)
* Length of time of credit history (when was your credit history established?)
* Type(s) of credit (credit cards, finance company installments, etc.)

When determining your score, gender, marital status, age, ethnicity, address and income are not considered.