When someone is planning to take out an insurance policy, they better make sure that their credit history is up to par. Today, there are many types of auto insurance companies that take into consideration one’s credit information when deciding the amount of premium to be paid. Thus, if they are shopping around for new auto insurance, making sure that their credit history is good can be an important step to getting the best insurance possible.
One of the main reasons why some insurance companies are taking into account one’s credit history is because they believe such histories are a clear reflection on the various behaviors of a consumer. Some other insurance companies often believe that people who have a better credit behavior would be a less likely risk, and would offer lower insurance payments per year.
However, those companies that make use of such a credit scoring rating method also make use of many other factors when it comes to determining what they can offer. Consumers trying to get the best car insurance should you avoid insurance companies that check past credit history if their credit history isn’t favorable. They’ll probably be deemed ineligible for certain discounts, which would increase the amount of premiums they would have to pay.
While some might think that it isn’t fair for any insurance company to review credit information without permission, remember that the Federal Fair Credit Reporting Act allows it. As per their own regulations, it is completely fair for any consumer reporting agency to adopt any types of procedures it might see fit as a means of not only increasing the value of the customer, but also thereby protecting its own interests.
This might include credit information, personal information or matters relating to other insurances the consumer has had. They could also look into information in regards to relevancy, accuracy and confidentiality.
Insurance Credit Score
There are some insurance companies that look at all a consumer’s credit reports when it comes to determining the premium rate. Most other intelligence agencies use a technique called “insurance credit score”.
This is a type of score rating method that has been developed based on various statistical techniques as a means of correctly predicting the probability of a customer actually suffering an anticipated loss. This is similar to what a lender would use as a means of focusing on a consumer’s repaying ability when providing a loan.
Some of the factors that various insurance companies may make use of in determining your credit score are listed below:
- Inquiries for credit: the number of times you have recently applied for new credit, including utility accounts, mortgage loans and credit card accounts.
- Past payment history: the days between the due date and late payment date and the number and frequency of late payments.
- Public records: foreclosures, liens, bankruptcy, collections, charge-offs.
- Number of open lines of credit: the number of credit cards, whether being used or not.
- Unused credit: how much is owed compared to how much credit is available.
- Length of credit history: the amount of time the consumer has been in the credit system.
- Type of credit in use: store credit cards, major credit cards, finance company loans, etc.
It is vital that consumers remember their insurance credit score could be different based on the insurance company. This is because most insurance companies do not use the same procedures as a means of evaluating the reliability of risk of a customer when it comes to determining the premium amount. Thus, it becomes quite difficult to predict what a good credit score to have is, as most insurance companies make use of different statistical techniques in determining the score is.
Consumers who don’t have a decent credit history need to be careful in choosing the best car insurance company for them. Most of the time, an insurance company might not even know what qualifies as a good credit score. Most of the time, all the insurance company really knows is that a consumer needs to have a good credit score. This can qualify them for a better insurance premium.
Credit History Errors
In any case where a consumer feels that the credit history being suggested by the insurer is not accurate, they should first make sure that they have used the right social security number, name and address.
If they still feel that there is some inaccuracy in the data made available in your credit report, they should immediately inform the credit bureaus. Within 30 days, they can expect an error report back and then request the credit bureau to send a notice informing the creditor of the same. The moment any errors in a credit statement are rectified, this latest information should be made available to any insurance creditors a consumer might visit.
The three national credit bureaus are:
- Trans Union (http://www.transunion.com/)
- Equifax (http://www.equifax.com/home/en_us)
- Experian (http://www.experian.com/)
It is always best that consumers ask their insurance company to reevaluate their credit score at the time of renewal.