Your credit score is such a curious little number. Perhaps you are aware of the impact that a credit score can have on your ability or inability to obtain credit. Perhaps you know how your credit score can be used as a measure of your ability to perform a job. Did you also know, however, that your credit score, in many cases, can have a profound impact on your insurance rates? It’s true, and not only for a handful of insurance companies. Most of the major insurance companies look not only at your past driving record, but also at how responsible you are in paying off your debts, and paying them on time.
Credit score isn’t a measure of wealth, after all. Rather, it is a measure of responsibility. This is evident not only in whether you pay your bills on time, but more generally, a sense of your ability to take care of the responsibilities that you accept. Of course, your credit score isn’t the only factor taken into account when determining your insurance rates. Insurance companies also look at factors such as education and occupation, as well. Is this discriminatory? Are insurance companies taking advantage of the largest segment of the population to give their balance sheets a bump? Perhaps not, because insurance is a numbers game, and it’s all about statistics and risk.
Risk is the measure of someone’s likelihood of making an insurance claim, and the measure of just how much that insurance claim will cost the company. It is in fact a score which is kept confidential from not only competitors, but also from consumers. This number is computed using several things, including marital status, age, education and occupation, geographical region, whether your car has anti-lock brakes and safety devices, and of course, your credit score.
So, how can you effectively reduce your insurance rates? First off, get a copy of your credit score. Many credit scores contain incorrect information, largely because the reports rely on companies willingness to report positive information as well as negative. Some small businesses, for instance, might be more negligent to report a paid balance to the credit reporting agency than they are to report a delinquent balance. If you find mistakes on your credit report, get them taken care of quickly, and then ask your insurance company to recompute your insurance score, and see how much you save. This might take some time, however, so don’t expect an overnight answer. Not only do the insurance companies need time to get your information corrected, but so do the three major credit reporting agencies.