SEP 14, 2011
Does your credit score affect your insurance rates? Right now, the answer is yes, your credit influences how much you pay for auto and homeowners insurance.
Should it? Thatâ€™s a question thatâ€™s being hotly debated by a number of groups, including the insurance industry, consumer advocates and the federal government. For the purposes of this blog, weâ€™ll leave the debate to them.
Nevertheless, there are several things you should know about how your credit affects what you pay for insurance. Knowing how the two are connected may help you make credit decisions that could lead to lower insurance costs. And having a better credit score may allow you to negotiate better rates when youâ€™re talking to your insurance company.
Most insurers will consider your credit score when deciding how much to charge you to insure your home or vehicle. Insurers tend to offer better rates to consumers who are perceived to be less of a risk. They reason that people with good credit scores make good credit decisions and are therefore likely to make life decisions that will minimize their exposure to risk.
So while having a clean driving record and maintaining your home can usually help you qualify for better insurance rates, keeping a positive credit report and score are also important if you want to lower your insurance costs.
Since taking care of your credit is something youâ€™re doing anyway, the effect a good credit score has on insurance rates can be an added bonus of your efforts to manage your credit score.