What does credit have to do with insurance?

Your credit history can have a tremendous affect on the cost and availability of certain types of insurance---especially homeowners and personal auto.

 

Insurance companies do not check credit because they're concerned whether you'll pay the premium.

 

They are concerned about losses, however.  It is an established fact that people with certain negative factors in their credit history have more claims, on the average, than people with positive factors.  And "on the average" is how insurance companies calculate rates and guidelines.  They do not try to figure your chances of loss, but those of thousands of people with similar characteristics.  And credit history is one of those characteristics.

 

Thus, as a general rule, credit problems may result in a higher premium; or, in some cases, with a company declining an application, leaving you only options of buying insurance from more expensive companies with less strenuous credit guidelines.

 

How is your credit judged?

 

Not the same way a bank judges your credit to apply for loans, etc.

 

Insurance companies use formulas that do not look at your income and expenses, but the number and types of bills, and how they are paid.  Each company uses a different system and formula, which makes shopping around even more important (and using Sauls Insurance Agency so much more valuable---because we'll shop around for you!).  

 

How does it work?

 

In virtually all cases involving credit, we submit basic information to the insurance company, which checks and provides us with some sort of score (different with each company).  We do not actually see a credit report, and don't know what's in it or what affects your score.

 

This enables us to shop for the best policy for your particular situation.

 

These checks will not affect your credit score.  If you order a copy of your credit report, they will appear as inquiries visible only to you.  When a bank or lending institution checks your credit, insurance inquiries do not appear.

Why is this a GOOD thing?

Credit scoring has allowed insurance companies to more accurately predict claims, and set rates that match future claims.  This has allowed them to provide lower rates for most people; about two-thirds of all customers have lower rates due to their good credit than they would if credit was not considered.

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