Insurance and Credit Score

Why does the insurance company need my credit report?



Insurance companies need to price right. If they price too low, then they will lose money. If they price to high, their competitors will sell more insurance. One factor that is taking on more importance in how an insurance company views you as a risk is your credit score.

Note: If you want legal ways to help build your credit score, visit Bad Credit Blues News.



Actuarial studies show that how a person manages his or her financial affairs, which is what an insurance score indicates, is a good predictor of insurance claims. Insurance scores are used to help insurers differentiate between lower and higher insurance risks and thus charge a premium equal to the risk they are assuming. Statistically, people who have a poor insurance score are more likely to file a claim.

Insurance scores do not include data on race or income because insurers do not collect this information from applicants for insurance.