Why Your Credit Score Matters to Insurance Companies

Credit scores affect our lives in so many ways, from landing the best rate for purchasing that new home to securing a much-needed line of credit for those unexpected hospital bills.

If you’ve ever been turned down for a credit card, or your insurance premium rate is higher than you expected, then you do have the right to see your report.

You can receive a free credit report within 60-days if you’ve been denied credit; or maybe your auto premium just went up twenty percent…time to find out why.  

But when it comes to insurance, why should it really matter to the company that you’ve maxed out the credit cards? As long as you are paying your monthly auto premium on time, you feel it shouldn’t matter.

Frankly, insurance companies use your credit scores from the credit agencies to help determine what kind of risk you might be.

  “Facts for Consumers” on the Federal Trade Commission website points out why insurance companies come to rely on your credit score:

Auto and homeowners insurance companies are among the businesses that are using credit scores to help decide if you’d be a good risk for insurance. A higher credit score means you are likely less of a risk, and in turn, means you will be more likely to get credit or insurance — or pay less for it.

Credit score matters insurance companies

So should you jump ship to another insurer to see if you can get a lower rate? The prevailing wisdom is to stay with your current insurance company; work on paying down your bills and see if you can get that credit score higher.

If you have a good  credit score , be sure to ask your insurance agent if you’re getting their preferred rate. Let him know you’ll shop around if you think you can do better elsewhere