Your Credit and Your Insurance Rates - There Is A Connection

Understanding and keeping current on your credit score can save you money on insurance costs. Insurance is a necessity for most people to protect them in the event something unplanned occurs. Homeowners, auto, health and life are the most traditional insurance policies. Travel, pet and renters are also common policies held by consumers. Insurance has long been known as a way to protect investments but skyrocketing premiums are a continued concern for consumers. 
 

Calculating The Costs
While most policy holders are unaware of how insurance costs and premiums are calculated; most insurance companies will not offer to educate their policy holders on the formulas used to determine their rates. Consumers shopping for insurance may figure costs are out of their control so the only recourse is to shop around for the best rate they can find. Most are not informed enough about the working of insurance to realize that a poor credit history may be contributing to the sky high premiums. Credit scores are one way that premiums are calculated for policy holders. Poor credit ratings prevent many policyholders from getting the best and lowest rates.   
 
Good Credit Has Pull
According to Fair Isaac in an article written for Money Magazine, an estimated 90 percent of auto and home carriers base premiums on a policy holders credit score but don’t tell them. Credit scores are used to evaluate the potential risk of the insured. Customers with poor credit scores are typically charged a higher premium than those with good credit scores because they are considered high risk.  
 
Take Back Control
Consumers shopping for insurance have more control than they think over their premiums. In June of 2007 the Supreme Court issued a decision that made it legal for insurance carriers to not inform consumers if they are paying higher premiums because of poor credit ratings. Insurance carriers may be privy to information from credit reports that will not be shared with the policy holders.
 
Stay Informed to Save More
An informed consumer can learn how to fight the battle of high insurance premiums by simply checking their credit rating. Consumers who are not in the habit of checking their credit reports may be paying more for insurance costs. The data on consumer credit ratings comes directly from credit bureaus. Credit reports are historically known for being inaccurate or riddled with information that is not up to date. Checking your credit report is a first step to taking control of costly premiums. Taking care of the controllable such as wrong information or inaccurate debts is a second step.   Improving poor credits scores may take some time but it will result in a cost savings in the battle of insurance premiums.