Posted: Sun Aug 24, 2008 3:56 pm Post subject: Credit score and insurance premium?
How bad your credit score can affect your insurance premiums ?I have a friend whose credit score sucks and he went for renewal of his car insurance the other day and the insurance company guys said his premiums have increased as is credit score is bad .Did any of you guys experience this kind of thing with any of your insurance companies?
Alot of states are allowing this...frankly I think it sucks, especially with the economy in the situation it's in...and this is coming from a woman with the highest credit score possible...it's just plain bad, IMO twenty years ago, I might've went along with it, but not now, not today with all the folks that struggle to just feed their kids.... _________________ Have you been helped by a poster? Do you want to show your appreciation? YOU CAN !! Just simply click on the donate button and send them some coin!
I agree. It doesn't seem fair that it should be based on credit with our horrible economy. We write for 6 different carries and each one does base it on credit. Not credit alone but it plays a big part in it.
This too is state mandated whether or not a carrier can use credit rating when rating policys....but unfortunately more and more are allowing it.... _________________ Have you been helped by a poster? Do you want to show your appreciation? YOU CAN !! Just simply click on the donate button and send them some coin!
I agree with my fellow posters. Renditioner, though there is no direct correlation between the credit score and insurance, but its gradually becoming a trend. More and more insurers are now entrusting upon the credit score in determining the insurability of an applicant. Hence, missing one or two payments on your credit card can now mutate your premium rate.
The insurance companies check with the credit score to determine how responsible you are in managing your finance and also to check your financial stability. A fair credit score depicts that you will be responsible in paying the premiums on time and may also be responsible in handling your assets, and that will minimize your chances of filing claims.
Earlier the insurers used to rely upon the CLUE report to check the policy holder's claim history, but many of them since then have made it mandatory to investigate into the credit report as well. And since we can't reverse the trend, it'd be wise to maintain a fair credit score to keep your insurance costs under control.
People with poor credit scores are likely to file more claims, atleast that is what the insurance companies feel. Insurance companies don't need your permission to run your credit report, hence, you may never know if the insurer had actually run a check on your report or not.
An average credit score between 650 and 700 can fetch you good premium rates, while you may face trouble in getting coverage if your score is lower than 600. Hence, it may prove worthwhile to try to improve the score.
If you have charged-off accounts and receiving calls from the lender or CAs, try to settle these accounts before applying for the policy.
As you can obtain a free credit report yearly from all the three credit reporting agencies, pull out one to check for negative and wrong entries.
Wrong entries can cause as much harm as the collections to your credit report that being pro-active in eliminating those can help in improving your score.
too many cards used up to the limit is also an alarming sign along with late payments to the insurance companies. Hence, these practices should be avoided at all means.
So the credit score is getting inextricably linked to our insurance premiums...And seeing the way our economy is now God only help us ..
Well, I guess the reason they relate credit score with the insurance is to check your premium paying capacity. A person with multiple loans and credit cards is more likely to miss payments on his insurance than a person with decent financial capacity.
The insurance company is undertaking the risk to cover you against the promise of receiving premium from you. And a person living to his limits is likely to default in the long run. This will increase the cost of coverage of the other policy holders as well.
I think also the theory is poor credit scores equal more claims reported...i didn't say it I'm just repeating it before anyone gets ticked....also the probablity of fraud to get out of debt (ie theft of vehicle, personal property etc). _________________ Have you been helped by a poster? Do you want to show your appreciation? YOU CAN !! Just simply click on the donate button and send them some coin!
also the probablity of fraud to get out of debt (ie theft of vehicle, personal property etc).
Well, the insurers feel that the customers with poor credit scores might take the advantage of the insurance policy to evade their loans by intentionally wrecking their properties.
And seeing the way our economy is now God only help us ..
Donno why do we always blame it on God...& at the same time pray to God when we don't have anything out of it. The root cause for the increase in importance of 'Credit score' has been inevitable with time.
It feels bad though..don't we see how it sometimes becomes easier for people to stay with heads high even when they are not working ( I'm not speaking of people who have become jobless as a result of economic slowdown...rather I'm talking of those who are not working for years with the slightest pretext of financial problems & passing on their burden over the rest of the population.) Am I being too harsh?
Let me tell you that a careless & insensitive lifestyle adopted by a fraction of the population has its far reaching effects in to the finance books of the global giants which force them to conduct background checks & issue policies accordingly.
Donno why do we always blame it on God...& at the same time pray to God when we don't have anything out of it.
I don't see anyone 'blaming' God...help and guidance of course, but see no one blaming him... _________________ Have you been helped by a poster? Do you want to show your appreciation? YOU CAN !! Just simply click on the donate button and send them some coin!
I agree with my fellow posters. Renditioner, though there is no direct correlation between the credit score and insurance, but its gradually becoming a trend.
Finally, someone on the same boat.
There is no denying the fact that people with lower credit scores file more claims. But the policy should be rated on risk and exposure, _not_ the likelihood that someone will hold the insurance company accountable for their promise if a loss is suffered. That is, "poor" people are more likely to file a claim when then suffer a loss... there is no indication that they actually have more losses (remember, they only file more claims).
It's allowed except in the states that have disallowed it. That is, more and more states are catching on and not allowing this practice. It's only when the people find out it's being done that they can say anything and insurance companies certainly are not advertising this fact.
It has nothing to do with the customer's likelihood of paying the premiums. There is a statistical link between a low credit score and a higher incidence of claims. Whether or not there is an actual *causal* link is a different debate, but a statistical link exists. This is the sole basis for this decision on the part of the insurance companies.
This is hardly a new practice. It's been going on for years. _________________ Register Now to have your Insurance queries solved.
Here is the bottom line... it's financial discrimination. A few states have seen fit to make it illegal (as it crosses the line).
Your also incorrect in that there there are two different things being discussed, having a loss and filing a claim. It's not a question of statistical vs casual links. A premium should be based on _risk_ and _exposure_... not the probability that someone will use what is being sold.
I'm not against increasing rates once a loss has been sustained... this goes to risk. But to judge _if_ someone is likely to use the policy (not likely hood of having a claim) and basing their rate on this is wrong.
