Credit History and Insurance

The subject of credit history and insurability is one that has many people concerned. Some claim there is no correlation between an individual's propensity to file an insurance claim and his credit score, while others claim there is a direct correlation.

One reason this debate continues is because there are no uniform guidelines for computing insurance scores. While credit scores fall somewhere between 300 and 990 points, depending on the scoring model used, there are no set guidelines for insurance scores. Every insurance provider has their own set of criteria for determining the degree to which you represent a financial liability. When it comes right down to it, insurance companies reward policy holders who present fewer claims.

If you're looking for auto insurance, some of the factors considered include your age, the type of car you drive, average daily mileage, and where you live. For homeowners insurance, providers take into account the type of home, location, proximity to fire stations, and construction factors. Whether they want to admit it or not, they may also use your credit score to determine whether it's worth their time to provide you with an insurance policy.

If you're currently having credit problems or your score is lower than you'd prefer, it's a good idea to stick with your current insurance provider. When you improve your credit score, you can look for a new insurance provider with better rates and better coverage. If you have to switch insurance providers, it's a good idea to ask if they take into account your credit score.

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