Introduction to Insurance and Credit

An insurance credit score provides an assessment of your insurance risk. It is calculated based on the information in your credit file such as collections, bankruptcies, charge-offs to name a few.

Keep in mind, insurers are no different than other institutions in the fact that they are only interested in how well you handle your assets rather than how much money you make or whom you owe.

Several key points that insurance companies use your credit for are...

· It lowers costs for the majority of consumers.

· It is a predictor of future claim filing.

· It fairly allocates the cost of coverage based on a consumer’s claim potential.

· It provides an objective tool for decision making.

· It increases the availability and afford ability of insurance for consumers.

· It allows insurers to underwrite some consumers who would not receive coverage using more traditional underwriting criteria.

Sound financial management is more important today than ever before. Banks, employers, and even cell phone companies use credit information. Maintaining good credit offers many benefits, and getting a better price from some insurance companies is one of them.

My next three posts will be dedicated to how and why insurance companies use your credit score.

I will also talk about the 5^th credit reporting agency that most people don’t even know about.

Image courtesy of Google.com.