Chantelle Dalby's blog ::...Greg and got the stupid car seat and he prescribed...to the doctor Monday. I have insurance adjusters coming tomorrow from my insurance co, I have to get an x...
There are many reasons we want to maintain a good credit rating, and now one of the most important is our ability to get reasonably priced car insurance. There is a general theory in the insurance industry which purports that people with higher credit scores represent a much lower risk in terms of ever making a claim. This means you pay lower premiums when you keep your credit scores high. Consumer advocates, along with insurance regulators and state legislators, do not all agree with this program, since there is no way to prevent abuse in the form of discrimination. Shopping for new insurance? Better do this when you have your credit rating under control. If there are some marks against you, then staying with your current insurer is a wise move. According to the Insurance Information Institute, over 90% of insurers look at credit ratings before writing a new policy, but less than 15% look at this on a renewal. Insurance companies do not look at your credit rating directly. There is actually a credit score and an insurance score, with the insurance score being more concerned with your ability to manage credit. There are basically three numbers they might use: first is the three-digit score which comes from the Fair Isaacs & Co., or they order your FICO insurance score, or they use these inputs to generate their own scoring system. No matter how it is formulated they will give you better rates when you have a higher credit rating. Insurance companies use a credit rating system based on your credit history in order to determine your risk level before underwriting a policy. According to the Insurance Information Institute, if you have a low credit score the experts feel that you are more likely to file a claim. This rating system applies for car insurance as well as homeowners. Studies show that those who manage their credit history poorly run a higher risk of filing a claim. To offset that risk the insurer will charge you a higher premium to cover their losses. This is logical in terms of the insurer limiting their exposure, but the homeowner suffers even if they work to improve their credit rating. We find limited options, and as a result tend to go with the first insurer that will take us. One of the items that can cost you a great deal more in the event you have poor credit is when you go to get insurance for your car. Personally I am not exactly clear on how my credit history is related to my need to submit a claim, but the insurance industry is convinced that low credit means higher risk in terms of filing claims. I learned about this recently when I changed insurance companies due to a car accident claim I made. The new company scrutinized my credit history much more diligently than the old company did 20 years ago when I first signed with them. Needless to say, it was a shock to find out that the insurer was so interested in my credit rating. The downside to this is that you have no control over the information that is gathered and sent to your insurance agency, so if they find negative items on your record, it could affect how much you will pay for car insurance. It is your job to make sure the credit report is accurate. It is too late once you start paying the premiums. In my experience, most insurance companies rarely roll back premiums when your credit rating improves, and they tend to wait to see over a much longer period of time that you will maintain the improved scores. So even a significant correction in credit rating may not impact your insurance rates for quite some time. The smartest thing you can do is to stay on top of your credit rating and stay on top of your insurance costs. What I have found works well is to visit two or three local insurance agencies looking for ones that can offer discounts by combining homeowner's and auto insurance. The more you can put under one umbrella, the more money they can save you per month . There is probably a chart somewhere which shows how much more you will pay with a credit rating of 550 versus 650, but the insurance companies do not have to publish that data. When pressed to disclose any useful information regarding this formula, most insurance agents tend to shy away. If you are canceled or denied then they have to send you a reason, according to the Federal Trade Commission. So if you want low insurance rates while maintaining good coverage, keep your credit history in good standing. Sources: Federal Trade Commission - www.ftc.gov/bcp/edu/pubs/consumer/credit/cre24.shtm. Insurance Information Institute - www.iii.org/press_room/. |
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