Most people know that At-fault accidents, violations, where you live, property value, and what you drive, are all reasons why your insurance premiums are at there current price as well as other factors such as age, experience, claims history, and prior insurance coverage as also factored in. But one factor that most people don’t know is apart of your premiums are credit history.
How It’s Linked
Research firms have found a link between bad credit and increased claim-filing. They also found that individuals with better credit have fewer traffic violations and accidents than those with bad credit.
After looking at data from roughly 1.4 million policies, the Federal Trade Commission (FTC) found insurers paid out almost twice as much for claims made by those with poor credit compared to people with higher scores.
The FTC said that credit scores are predictive of the number and cost of claims filed, and are effective at assessing risk and rates.
Good credit = lower risk
Customers who pose less risk in all the factors used to calculate premium rates pay lower premiums. The corollary is that high-risk customers pay higher rates. The “credit” factor is similar to any other factor, such as make of car, at-fault accidents, your neighborhood, and your claims history. It will impact your rate.
While it’s unlikely you’ll start making financial decisions based on how they might affect your insurance premiums, it’s important to know how insurance companies establish premium rates.
What you can do
Understanding why credit affects rates can make you more aware of those things that affect your credit score – missed payments, high credit card debt, and even closing a credit card or an account. Controlling these factors can make a difference.
Contact Brazelton Insurance Group for more information.