Everyone knows that having a good credit score means that you have an easier time taking out loans and you have a lower interest rate on those loans. Having a good credit score can go a long way when paying your insurance premiums as well.
Insurance is based on risk and its popular opinion that people with low score or bad credit history are high risk. Therefore, the higher the risk you are the more your going to pay for insurance. On the flip side the better your credit history the lower your premiums are.
According to some studies people with lower credit scores, don’t pay their bills and tend to file more claims.
Of course there are exceptions to this as there are several other factors that go into coming up with a premium amount on your insurance such as where you live and/or work, the higher risk the area the higher the premiums you pay. So, if you live in Tornado ally your going to pay more than someone who lives where there is virtually 0 storm damage ever. Just remember when you’re comparing what you pay for insurance while standing around the water cooler at work, if you live on the same block in the same style home and have the same accident or claim free history as Joe but your credit score is not so great because of some student loans or a bad divorce odds are he will be paying much less than you for the same coverage.
Remember, your “Insurance Credit Score” is different from your actual Credit report. Insurance scores are based more on how long you have managed your credit than what your propensity to take on new credit would be.
Word to the wise, Protect your identity, make those payments on time, drive safely and don’t move into a crime riddled neighborhood and you’ll have lower insurance premiums.
I know it dosn’t seem fair and it’s still up for debate on whether it actually is, but for now its the way things work. What do you think? Should Insurance premiums be based partially on your credit score?