Insurance Shopping Blog

Tough Times for Insurance Buyers With Low Credit Scores

Many insurance companies have a ranking system in place, a so called “tier system”, that helps to determines how much you pay for certain kinds of insurance based on what your credit score is.

In combination with other factors, if your credit score is poor, you may pay more, and conversely, if your credit score is good, you may get a much lower rate.

According to the Federal Trade Commission (FTC), Credit scores help insurance companies “better match the risk of loss that consumers pose, so higher-risk consumers pay higher premiums and lower-risk consumers pay lower premiums.” “[Credit] Scores permit insurers to evaluate risk with greater accuracy, which may make them more willing to offer insurance to higher-risk consumers for whom they otherwise would not be able to determine an appropriate premium.”

Spokespersons for insurance companies say their research clearly demonstrates that people’s credit scores are a good indication of how likely they will be to file claims and otherwise increase costs to the insurance industry. For example, they say that people with poor credit are more likely to let their insurance payments lapse.

So, while you may have a driving record to be proud of, unfortunately, it may not help you that much if you have a poor credit score.
Click the link to find out more about your insurance credit score and what you can do about it.