Insurance and Your Credit Score
Learn More about How a Credit History Impacts Insurance Premiums
Learn more about how your credit score impacts your ability to get insurance. A poor credit score may mean higher insurance premiums or getting denied for insurance.
Your credit score can significantly impact your ability to get insurance and the cost of insurance, too. Your credit score is a measurement of your credit history in numeric form. Insurance companies use your credit score to help determine your eligibility for a policy, the types of coverage you can have and also to decide how much you should pay for insurance premiums. Insurance companies do not need your permission to run your credit report.
Insurance companies think that people with problem credit are more likely to file insurance claims. According to insurance companies, people who are likely to file claims should pay more for insurance, get reduced insurance coverage or be denied for insurance. What you need to know about your credit score when you’re trying to get insurance or reduce your insurance premium:
- If you have a credit score of 700 or higher, that’s a very good to excellent credit score. Your ability to get insurance and to get the best premium for insurance will not be negatively impacted by your credit history.
- If your credit score falls between 650 and 700, you have very good credit. The average credit score in the U.S. is 692. You should be eligible to meet insurance companies’ financial criterion and your insurance premium shouldn’t be impacted by your credit score.
- If you have a credit score that falls between 600 and 650, that’s still pretty good. Though no one knows exactly how each company uses a credit score, this credit range probably won’t impact your insurance rates or your ability to get insurance.
- If your credit score is less than 600, you may have a problem either obtaining insurance or getting a competitive rate for insurance premiums due to your credit history.
What You Can Do to Improve Your Credit Score
There are things you can do to improve your credit score. Get these items cleaned up and removed from your credit history and you’ll stand a better chance of getting affordable insurance premiums:
- If you have any collections agency reports on your credit report, find out if you can settle with the collections agency for a lesser amount. Make sure they state in writing that they will remove the negative item from your credit history once they receive your payment.
- You negatively impact your credit score if you make payments late, have a lot of open lines of credit or run over your credit limits often. Work to pay more than the minimum amount due on your credit cards, close credit cards that you don’t need and stay within your limits when you use your credit cards. All of these things can help improve your credit score and the premiums you pay for insurance.
- If you find a mistake on your credit report, immediately contact the appropriate parties to dispute the issue. Once the item has been removed from your credit report, contact your insurance company to let them know. Credit reports and credit scores are updated frequently, so they should be able to see the change right away.
Your credit score can greatly impact your ability to get insurance or the price you pay for insurance premiums. And, if the insurance company runs your credit report upon policy renewal, they may decide to non-renew your insurance policy or raise your rates if your credit score hasn’t improved.
You’re entitled to a free credit report every year. Visit annualcreditreport.com to order your free credit report. And learn more about saving money on your insurance including how to save money on homeowner’s insurance, finding auto insurance discounts and finding medical debt help.
Talk back with a writer- tell Lisa Nichols about your experiences with insurance and your credit score
