It goes without saying that your credit score ultimately decides your financial fate. Whether you are applying for a home loan or auto loan, a high credit score improves your chances of getting approved and for hopefully the lowest possible interest rates. On the other hand, bad credit can have the opposite effect.
While there is a lot of pressure to maintain good credit, and for a good reason, there is another reason you may have still not considered… insurance premiums. Yes, insurance companies care about your credit score. It is a little-known fact which is why we’ll get into this here.
Think of It As An Insurance Score
Lenders and insurers alike want to know how much of a risky investment you as a person are. Generally, they do that by looking at your history to come up with the right rates so that the person who has, let’s say, a dozen fender benders a year and ten speeding ticks gets to pay more than the person with an excellent driving record. If an insurer checks your credit score to find that your finances are in despair, it sends the message that you are not responsible or in control of your life, which means that you pay more in the way of premiums.
That’s why people with bad credit will generally pay higher premiums for the same insurance than a person with good credit. It applies to insurance types from car insurance to health and property insurance.
Good Credit Translates To Cheap Auto insurance
A good score will mean that you pay less for car insurance premiums. According to a Consumer Report survey, a couple with poor credit paid over $2000 more in premiums for two cars compared to a couple with good credit. Then there are also insurance companies that have figured out that married people drive safely compared to those who aren’t, so that means they pay less in the way of premiums.
Homeowners Insurance Rates
A person with good credit can expect to pay almost a third for homeowners’ insurance compared to someone with fair credit. The fact is that insurance companies’ claims can be expensive and often common, which means greater financial risk. So, if the company sees that the person is a high-risk client, they tend to price their premiums on the high side.
Your credit score may not have as much of an influence on your health insurance rates as other policies stated above. But that still does not mean they (insurers) will roll out the red carpet for you. You still have to pay your health insurance premiums on time since late payments will negatively affect your rates.
As we have just seen, what you end up paying for insurance directly reflects upon how good your credit score is, which is why maintaining a good score is important. One way to do it is to make sure that all your credit card bills, along with mortgage payments and vehicle payments, are made on time. If you have bad credit consult with a credit repair expert and get on a path to improve it.