Maintaining a healthy credit score is essential in our society and can affect many of your future plans. But did you know it can impact your insurance rates too?
When setting your rates, insurance companies look at a variety of factors. One such factor is your credit-based insurance score, which is actually a bit different than a regular credit score.
The Difference Between Credit-based Insurance Scores and Credit Scores
Your general credit score is used by lending institutions to determine the likelihood that you will repay a loan. It is also used to determine your interest rates. However, most insurance companies are actually looking at your credit-based insurance score to determine your rates.
Unlike a general credit score, a credit-based insurance score does not take into account your job, income history, gender, or any other personal information.
Factors of a Credit-based Insurance Score
- Payment history
- Outstanding debt
- Credit history length
- Pursuit of new credit
- Open accounts
How a Credit-based Insurance Score Is Used
Your credit-based insurance score is used to determine the likelihood of an insurance claim in the future.
If you have a low credit-based insurance score, your rates will typically be higher. However, insurance companies will also look at several other factors, such as your driving and claims history, to determine your rate.
A poor credit-based insurance score is not a guarantee that you will be slammed with high premiums.
To keep your rates low, you will need to maintain a solid credit score. It also helps to shop around. Every insurance company will factor in your insurance-based credit score differently.
For free comparative quotes from several trusted insurance companies, contact Burkhart Insurance Agency.