Why Do Insurance Companies Use Credit Scores?
Insurance companies use your credit to predict how often the homeowner insurance policy holder is likely to make a claim. Your credit report, which is available from three major credit-reporting bureaus, gives the insurance company an indication of your financial management efficiency. Insurance companies base their conclusions on statistics. Statistics show that those people with good credit scores pay premiums regularly and make less insurance claims.
How Do Insurance Companies Use Credit Scores?
Insurance companies order credit reports from one or more of the three credit reporting bureaus: Equifax, Experian or Transunion. These reports are then put through a computer program that generates an “insurance score.” The insurance score is based on the patterns of your financial management recorded by your credit report. This pattern is reflected by your payment history, credit utilization methods and bankruptcy, if any. The insurance score, based on your credit score determines the amount of premium you will be required to pay.
The Result Of Your Credit Score Sets Your Insurance Score!
Once your credit score and your insurance score are good; you will be regarded by the insurance company as an insurable asset. You will be charged lower premiums and can take advantage of the many discounts offered by the insurance company. If your insurance company is a mutual insurance company, you will be treated as a shareholder and paid a dividend from the profits of the company. A bad score will result in denial of insurance, canceling of your existing policy and refusal by the company to renew the insurance policy. Higher premiums are charged and in some cases a surcharge is placed on the premium. In mutual insurance companies where a dividend is paid to the insured from the profits, a bad credit score results in denial of dividends.
The Advantages Of Credit Based Scoring For Your Home’s Insurance.
You can ask for and the insurance company will give you on your homeowner insurance policy when you have a good credit score. Insurance companies find credit scoring advantageous because it helps promote competition among them and gives them a clearer indication of the premium that they should charge the insured.
Getting The Best Rate!
Experts in the industry highly suggest that you seek and obtain a minimum of at least three online insurance quotes for insuring your home. Once you enter all details that the quote engine asks for you will be automatically sent a quote for your inspection so that you can make an educated choice. Also, for info on insurance in Florida click: minimum requirements if you live in that state.
