How does my Credit Effect My Insurance Rates
How Does My Credit Effect My Insurance Rates
Art Glasgow, Peck-Glasgow Insurance
As Independent Insurance Agents, we are constantly asked the question ” how does credit effect my insurance rates”? This is a good question. With the implementation of Multivariate Models which predict losses and prepare pricing based on a set of information variables provided by the consumer, rates are all across the board. Rates for two individuals that own the same auto’s, live in the same communities, and several other variables can vary greatly just by having one decenting variable, such as credit or prior insurance.
Credit scores are based on an analysis of an individual’s credit history. Insurers often generate a numerical ranking based on a person’s credit history, known as an “insurance score,” when underwriting and setting the rates for insurance policies. Actuarial studies show that how a person manages his or her financial affairs, which is what an insurance score indicates, is a good predictor of insurance claims. Insurance scores are used to help insurers differentiate between lower and higher insurance risks and thus charge a premium equal to the risk they are assuming. Statistically, people who have a poor insurance score are more likely to file a claim.
The best way to improve your insurance score is to work on your individual credit score. Factors such as limiting credit capacity, paying your bills on time and being financially responsible with your financial life.
If you have any other questions on how credit may impact your insurance rates, please contact a Peck-Glasgow Insurance Agent. We can review your homeowners, auto, life and business insurance policies and discuss how improving your credit level can lower your insurance rates.