Credit Score and Insurance: How Are They Related?

Credit score and insurance are very much related. Insurance providers may utilize your credit history while you are going for new home or automobile insurance. This article would give you some useful details that would help you know in what manner your credit score is utilized by the insurance companies.

What Is the Credit Score that Insurance Providers Prefer?

A credit score is basically a picture of your credit at a particular moment. The details of your credit history and your application for insurance are taken into account by the insurance providers for determining a particular credit score. This is known as insurance credit score and it ranges from 0-999. A higher insurance credit score suggests a better score.

How Your Credit Score is Utilized by the Insurance Providers

If an insurance company is dependent on credit score, it can utilize your credit score for the purpose of underwriting and ascertaining the amount of premium payable by you.

Underwriting is the procedure of determining whether a new policy can be issued to you or a current policy has to be renewed.

Rating is the procedure that decides the amount of premium that you need to pay for insurance. Besides the usage of credit details, insurance providers would utilize other conventional rating elements to figure out the premium that is payable for your home or automobile insurance policy. A few of these conventional rating elements include the following:

Homeowners insurance - your claim history, your residential address and the replacement cost of your home.

Automobile insurance - your residential address, type of car that you have and your driving history.

How Would You Know Whether Your Credit History has Influenced Buying of Insurance?

FCRA (The Fair Credit Reporting Act) necessitates insurance providers to inform consumers if any unfavorable step has been taken due to their credit details. FCRA delineates unfavorable steps to include raising of premiums, refusing or terminating coverage, altering the amount of coverage or the terms and conditions in such a manner that it causes harm to the consumer. The insurance provider should also let him know the name of the countrywide credit bureau that provided the details.

Instances of an unfavorable step include the following:

• Termination, refusal or non-renewal of coverage
• Restricting advantages like eligibility for dividends
• Not offering the consumer the cheapest rate
• Not offering the consumer the most attractive discount
• Providing the consumer an incomplete type of coverage
• Providing coverage for something else that was not asked for
• Addition of a premium surcharge