Credit Scores and Auto Insurance
In today's world your credit score is used for almost everything and your credit history is examined when you apply for mortgages, personal loans, bank accounts, credit cards, and sometimes even when you're applying for a new job. As well, your credit score is a factor in whether or not you can obtain auto insurance, and how much you will pay for it.
Insurance companies use credit scoring to determine your insurability because they believe there is a correlation between your consumer credit history and whether or not they are likely to have to pay claims on your behalf. They also feel that people with good credit are less likely to suffer from severe insurance losses.
While most insurance companies also use your age, driving record, type of vehicle and your place of residence to determine your premium, your credit score is also factored in. If you don't have a credit history at all you may not be eligible for some discounts, and your premium may be higher. On the other hand, if you have a poor credit score, you may find that even with allowable discounts your premium is still higher than it would be if you had perfect credit. If your credit is extremely poor, you may be denied standard coverage and have to look into pool insurance, which is state-sponsored minimum insurance for those with bad driving histories, poor credit, and low incomes. You cannot be denied ANY coverage, but you CAN be denied the best coverage.
Can They DO That?
You may wonder if an insurance company can look at your credit information without your permission. As long as you have applied for insurance, the Federal Fair Credit Reporting Act allows the use of credit information for "reasonable procedures." Determining credit worthiness for insurance is such a procedure, though your insurer is still required to maintain confidentiality and accuracy. They're also required to notify you that a credit report was requested.
While some insurance companies will look at your actual credit report, many use an "insurance credit score" which is a derived by using statistics to determine your likelihood of having a higher-than-average insurance loss. It's comparable to the kinds of scores mortgage companies use to determine your likelihood of repaying your loan. When developing your credit score, your insurance company will look at the following factors:
Public records, including charge-offs, collections, bankruptcies, foreclosures, and other liens
Payment history, which includes the frequency and number of late payments, as well as the degree of lateness
Number and type of open credit accounts, including credit cards, store charge cards, and loans
Available credit: the ratio of available credit to the balances on your various credit cards.
Length of history: how long you have had reportable credit.
Every company uses different factors, and insurance credit scores are not identical to mortgage credit scores, though similar information is used. Unlike the mortgage industry, however, insurance companies are not required to tell you your score, and your agent may never see the number itself, but will only know what it qualifies you for.
If you have anything on your credit that may be an issue, tell your insurance agent up front, so that they are prepared, and can do their research ahead of time. This is especially important if you are dealing with in independent agent who sells insurance from more than one company. If there is incorrect information on your report, be certain to contact one or all of the three major credit bureaus. It can take up to thirty days for them to investigate and resolve any discrepancies.
Your insurance credit score may determine your level of insurability, but one thing it doesn't measure is your worth as a person. Even the worst credit can eventually be repaired, and once you have a policy and are known to make premium payments on time, some of the discounts that were originally unavailable to you may become so, after the fact.
More and more states are trying to make uninsured motorist protection mandatory. Learn why.
Related Articles:
Fortora's Straightforward Personal Finance Manager for Mac & Windows Ships
Version 1.1 of Fortora Fresh Finance, the straightforward personal finance software for both Mac and Windows, is now available.
Springboard Assists Federal Reserve Bank with Community Response to Rising Mortgage Woes
Springboard President and Chief Executive Officer Todd Emerson panelist in discussions with counselors, lenders, and community leaders to asses community impact of mortgage default and foreclosure
Bank on It Slot Machine
Some of the new slot machines have so many side games that they are confusing. It almost becomes a game of inserting your money, hitting a button, and seeing what happens. If you want to have fun, and know what you're doing, Bank on It may be just the ticket.
Annual Credit Report and Free Annual Credit Report
Getting an annual credit report review has been the advice of many financial managers as they guided their customers to be aware of all information on credit reports. Would the idea of a free annual credit report be good news? Consumers are thrilled with the new federal mandate that demands the three major national credit bureaus offer a free annual credit report to anyone requesting copies of their personal credit reports.
Playing Your Cards Right -- Tips for Traveling with Credit Cards
Using credit cards while traveling is a good idea for a number of reasons:You have a record of your expenditures for record-keeping and tax purposes (especially important if you travel for business)You may get a better exchange rate when obtaining foreign currency when using your credit card.Credit card companies can refund disputed charges and may offer extra guarantees, special deals or warranties.
Why Apply Online For A Credit Card
When you want to apply for a credit card, you normally go to the offices of banks and credit card companies to apply for one. This can prove to be a hassle as there is a possibility of long lines with the submission of the application. Or, you can also wait a few days to get the application mailed to you by calling customer service hotlines.
Laurie Joins Panel at IP Finance and Valuation Conference
Inflexion Point Strategy, LLC noted today that Ron Laurie, Chairman of the Inflexion Point Group, would participate as a speaker and panelist at the Intellectual Property Finance and Valuation Conference held by Incremental Advantage in New York September 18th, 2007. Mr. Laurie will provide remarks in a session titled Using Intellectual Property to Make Investment Decisions.
Credit Card Late Fees - How to Avoid Them
Credit cards have become a common means of paying bills. It is very convenient because you need not make any cash payments from your pocket. Though credit cards are easy to use, they come with a fee that is charged by the credit card company. It is advisable to pay credit card fees on time because being late will cost you a lot of money.
Credit Card Rates - Negotiating Rates with Your Credit Card Company
Ok, let's face it, everybody hates high credit card rates, and they drain hard earned money out of your wallet. As a valued consumer, it is apparent that you learn how to negotiate to get the absolute best rate that you possibly can.
Forexyard Has Announced its Strategic Partnership with HSBC Bank
FXYARD LTD has announced its strategic partnership with HSBC Bank. FXYARD decided to locate its banking operations in London England to allow for maximum security of customer funds.
