|
Most insurance companies will use your credit history and use your age, your driving history, your type of vehicle and where you live in determining how much you should pay for your insurance.
So, if you have
not established a credit history yet or have poor credit then these type of companies may not be best for you. They may not allow you to be eligible for certain discounts, which could result in higher premiums
and we all want the lowest prices as we can get. Is it fair for an insurance company to even look at my credit information without my permission? That is a question most people would say NO to but the answer is yes. The Federal Fair credit-reporting act says
its Reasonable
procedures. It is the purpose to require that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit. This can be found at http://www.ftc.gov/os/statutes/fcra.htm
Some insurance companies will look directly at your actual credit reports when determining your rate, however most will use what is called an "insurance credit score."
The higher your score the lower your cost should be.
An
insurance credit score is developed by using methods to predict the likelihood a consumer will have a higher than anticipated losses. These are similar to what lenders use to predict
the reliability of an applicant repaying a loan.
Credit History Factors and Car Insurance Rates
- Public records: bankruptcy, collections, foreclosures, liens, charge-offs, etc.
- Past payment history: the number and frequency of late payments and the days between the due date and late payment date.
- Length of credit history: the amount of time you have been in the credit system.
- Inquiries for credit: the number of times you have recently applied for new credit, including mortgage loans, utility accounts, and credit card accounts.
- Number of open lines of credit: the number of credit cards, whether you use them or not.
- Type of credit in use: major credit cards, store credit cards, finance company loans, etc.
- Unused credit: how much you owe compared to how much credit is available to you.
Your insurance credit score will differ from company to company. They will use different factors in determining your premium and is why we call it an insurance credit score.
Since each insurance company uses different techniques to determine your credit score it is hard to tell you what a good credit score is. The better credit score you have will result
in lower premiums.
Your agent or company is not obligated to tell you your credit score so you really should not even ask them because they would not tell you anyways. In fact, they might not even know what it is. All they usually know is that your credit score qualifies you
for a specific rate or policy. Some companies also offer better rates under each qualifying tier.
If you feel that there is incorrect information on your credit report, you should tell the credit bureau. If you report and error, the credit bureau must investigate the error
and get back to you within 30 days. You can ask the credit bureau to send a notice of the correction to any creditor or insurer that has checked your file in the past six months. Once the errors are corrected,
it is a good idea to get a new copy of your credit report several months later to make sure the wrong information has not been reported again.
The three national credit bureaus are:
- Trans Union (www.transunion.com or 800-888-4213)
- Equifax (www.credit.equifax.com or 800-685-1111)
- Experian (www.experian.com or 888-397-3742)
Do not wait until the credit bureau investigates the errors to contact your insurer. Let your insurance company know right away and ask if the errors
will make a difference in your insurance. If the errors are big, tell your insurer that you are disputing the information and ask if they will wait to use your credit information until the errors are corrected.
Small errors may not have much affect on your insurance credit score.
If you have taken the steps to improve your credit score, you should ask your insurance company to re-evaluate your credit score at renewal to see if your premiums will go down.
Car Insurance Free Quotes
|
