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Insurance Good or Bad Credit
Your credit score can
have a profound effect on the amount you have to pay not only for auto
insurance, but for homeowners insurance also -- and perhaps on health and life
insurance in the not-too-distant future. Many insurance companies and some
academics feel strongly that a mediocre or bad credit rating means you're a high
risk. Many consumer advocates, state legislators, and state insurance regulators
think not. The debate may go on for quite awhile because even the true believers
admit they don't know why the two are related -- they just know they are.
Almost all auto insurers --
92 of 100 polled in a recent survey by the research firm Conning & Co. -- and an
increasing number of companies writing homeowners insurance are now using credit
information to decide whether to issue a policy on your car and/or home. In some
cases they also use it to set the premium. They also use their own underwriting
guidelines, such as, in the case of homeowners insurance, the age of the house
and the roof, prior losses, and the home's construction type.
The Insurance Information
Institute, a trade association for insurers, says drivers at the bottom of the
credit heap file 40 percent more claims than drivers at the top of the pile. The
institute doesn't have such statistics yet for homeowners insurance claims.
"A consumer with bad credit
is going to pay 20 to 50 percent more in auto insurance premiums than a person
who has good credit," says Clarence Smith, former assistant vice-president at
Conning & Co. On the other hand, having sparkling credit could land you lower
rates so you should shop around if you've got a glowing report.
To factor in credit ratings,
insurance companies use either the Fair, Isaacs & Co. three-digit credit score
alone; order an "insurance score" from FICO; or create their own, proprietary
score using FICO credit scores or FICO insurance scores and adding in their own
underwriting criteria.
The companies generally do
not look at your actual credit report. Instead, it receives your credit score or
your insurance score from one or more of the three major national credit
repositories -- Equifax, Experian and TransUnion. The two types of scores --
credit and insurance -- are quite different. "An insurance score is going to be
less concerned with your propensity to take on new credit and more interested in
how long you've been managing credit," says Craig Watts, a FICO spokesman.
"Insurance scores focus on issues of stability."
accidentsdirect.com
accidentsdirect.com
lives-assured.co.uk
lives-assured.co.uk lloyds-insurance-underwriting.co.uk
lloyds-insurance-underwriting.co.uk
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