Data Facts Lending Solutions Blog

Does Your Credit Score Affect Homeowner's Insurance?

by Jennifer Hamby

Jan 14, 2015 2:16:00 PM


Yes!  Did you know Insurance companies use information in your credit report to calculate an insurance score?  Similar to a credit score, insurance companies use insurance scores to help them predict losses by determining which consumers are more likely to file claims, these findings help determine your premiums.

Insurance scores can have a big impact on the amount of premium that you pay for your coverage.  In this regard, a higher insurance credit score will result in you paying a lower amount of premium, and conversely, a lower insurance score will likely result in you being charged a higher amount for coverage

 While a small premium difference may not seem substantial, over time, the difference can add up to thousands of dollars! 

Your insurance score is based in large part on your overall credit rating. Similarly, it considers your outstanding debt levels, the length of your credit history, how timely you pay your bills, your number of credit accounts and your new credit applications.  Same as with a credit score, a long, established credit history, the absence of late payments and collections accounts, low credit balances will lead to a positive insurance score.  This is because historical data reveals that there is a distinct correlation between one’s credit rating and the amount of insurance claims that they file. The insurance score that you are ultimately given is therefore based on a combination of your credit score and your past insurance claim filing history. 

If you currently possess a low insurance score, there is good news. There are several ways that you can improve your score – ultimately resulting in your insurance premium amounts being reduced.

One way of improving your insurance score involves increasing your credit score and history. Here, you can concentrate on paying all bills in a timely manner, and reducing your overall amount of debt. In addition, by filing fewer – or no – insurance claims over a certain period of time, you will also be taking steps to improving your overall insurance score figure. 

And remember, because credit scores play such a significant role in price, interest rate and terms, it is critical you ensure your credit report contains accurate information.  Please remember to check it once a year, and dispute any inaccurate information.

Topics: Credit Score

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