Insurance Article

We all know that when dealing with financial institutions that your credit history is vital when getting a loan approved. Insurance companies also look at individuals credit score when determining how much they will pay for their premiums. All states in the U.S. adhere to this practice except two (California and Maryland), even though it is not disclosed by the insurance company. According to one insurance research company 92% of the countries top 100 auto insurance companies used credit data when underwriting policies.

A credit score is determined by your history of paying credit cards, loans, medical, bankruptcies, collections and delinquencies to name a few factors. A credit score ranges between 300 (the lowest) to 900 (the highest theoretically). 600-650 is considered a fair score while anything over 700 is good. The loss of 100 points off your credit score can result in thousands of dollars added to your annual premiums.

The insurance company uses your credit score because it sees the way you handle your responsibility towards your debts as an illustration of how you conduct yourself in all manners regarding responsibility in your life. Studies show that people that fail to pay their bills are more likely to file a claim.

Tips to avoid low credit scores

• Keep an updated list of all accounts, due dates, balances and credit limits (automate your bill paying process).


• Pay bills as soon as they arrive (as many as 100 points can be deducted per default).


• Keep an eye on all accounts carefully (keep balances low and spend around 1/3rd of your credit limit).


• Minimize credit card applications (avoid unnecessary credit).


• Check your credit report at least once a year.