Yes, your credit score influences your insurance. Here’s what you need to know about the role your credit score plays on your insurance premium.
What is credit-based insurance scoring?
Credit-based insurance scoring is when insurers consider your credit score and several other factors to calculate the premiums you will pay for your insurance. In essence, it can help insurance companies know how much risk will be involved with you as a client and it can help save you money.
What else do insurance companies consider?
There are several factors that are also considered with your credit rating. These include:
- Your home’s details: How old it is, how big it is, how it was made, where it’s located, etc.
- Your neighbourhood: What is the crime rate like in your neighbourhood? Are you near a fire station or fire hydrant? Are you in a neighbourhood where you could be hit by a sewer backup?
- You: What is the history of your claims? How much would you value your belongings?
- Miscellaneous factors: What kind of coverage and deductible are you choosing? Do you have any discounts available?
What’s involved in a credit score?
Credit scores are made up of a variety of their own factors including:
- Any bankruptcies or foreclosures you’ve had
- Outstanding debt
- Credit history
- Types of credit used
The insurance company cannot access your credit score without your consent. And they will also access it annually to review your premiums and when renewal is considered. Insurers also aren’t allowed to deny you insurance based on your refusing their access to your credit score.
How much lower will I pay?
It depends on your credit scores. Quite simply, if your score is good, you may receive a discount on your insurance premiums. If it’s not, you won’t be charged more.
How can I improve my credit score?
If you wanted to look into this kind of home insurance in the future, there’s a way to get your financial house in order to boost the status of your credit score. This includes:
- Pay your bills in a timely manner — even before they’re due, if possible. If not, pay at least the minimum
- Keep under your credit card limit and keep your balance low
- Pay down your debts as soon as possible
- Keep in touch regarding life events that may influence your credit score, e.g., death, serious injury, and divorce
