How Your Credit Impacts Insurance

Most people know that insurance carriers use credit as an underwriting factor, but they’re not really sure why we use credit or what credit has to do with insurance.

Why Do They Need My Credit Score?

Insurance actuaries began looking at credit based insurance scores as a rating factor for insurance because they found a correlation between insurance scores and claims predictability, especially minor claims.  Insurance scores do not factor in any personal information, including your job or income history.  Instead they use your payment history and the length of your credit history to predict your insurance risk level. Your insurance score along with your driving history and other factors, determine the rate your pay for your insurance.

Keeping Your Credit Up

Some states have outlawed the use of credit based insurance scores as an underwriting factor, but the practice is legal in Texas.  Right now, with the insurance rates rising, everyone looking for ways to save. We thought we would bring up this one often not realized underwriting factor that does have a big impact on your insurance premiums.

Factors Insurance Companies Consider

Insurance companies are looking at your credit utilization, late/slow/non-pays, and those types of factors. It shows your stability and your ability to cover smaller losses should something happen. The best way to improve your credit based insurance score is to make your payments on time and keep an eye on your credit utilization.

Read  more about how insurance carriers use credit here, Background on: Insurance scoring.