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What A Favorable Insurance Score Includes
Author David Schneider | May 23,2007
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When you approach that insurer about issuing you a policy for either a car or a home, most insurers will now check your insurance score first. They use this figure to determine your premiums - or they may reject insurance coverage for you altogether if the score indicates that they should. Here is what makes up a favorable insurance score so you can get the best rates.
Your Credit Score
The first thing that will be checked is your credit score. Yes, they use the same credit reporting agencies as a lender in order to get your current credit score. This credit report will show how you regularly handle your finances. If you regularly make late payments - it will show. It will also indicate the credit cards you have, any outstanding loans, and how much indebtedness you still owe.
Having a good credit rating is one good way to end up with good insurance rates. However, it is not the only consideration. Here is another one.
Your Accident Record
The insurer will want to know, if you are being insured for a car, what kind of accident record you have had in the past. For a favorable record, there should be none, or maybe just a minor one, a number of years ago. Your record will prove that you can and do safely handle a car - regularly. This shows to them that you are less likely to have an accident in the future. They strongly believe that your accident history indicates the way that you will continue to perform. So, by continuing to drive carefully, you can keep your insurance score favorable.
Previous Claims
If you have had any previous claims on an insurance policy, then that is also reflected in your insurance score. Whether you are buying a house, or a car, any claims made towards either one will effect your future premiums. That is, claims on a home insurance policy will also effect your home insurance premiums, etc. The fewer claims the better, but sometimes a claim is necessary.
Improving Your Insurance Score
A lot of weight on an insurance score will come from your credit score. In fact, this may be about the only thing that you can actually change. By watching carefully over how you handle your finances, you can increase your credit score. This may mean that you need to reduce the amount of credit you have, or, reduce the amount of debt (debt to income ratio) that you have on your credit cards. Transferring debt does not reduce it, but paying some of it off will.
Also, be sure to look at your credit report, which you can order free once a year from each of the big three credit bureaus - TransUnion, Experian, and Equifax. This report could contain errors on it that can negatively effect your ability to get either the credit or the insurance rates you want. Be sure to look at it before you apply for any insurance, and at least once a year, before the policy needs to be renewed. The insurer will look at it every time there is a renewal. |
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