8 Tips to Improve your Insurance Score

October 9, 2015 by novallus

Here's another, perhaps unexpected reason to pay close attention to your credit report. Insurance companies use a version of your credit score called your insurance score as a factor to determine your premiums.

What is an insurance score?

An insurance score is based on your credit history, and it is used by insurance companies to predict the potential for future losses. Insurance companies use your insurance score, along with a number of other factors, to determine your rate.  Generally speaking, customers who have good insurance scores qualify for lower rates. It’s not the same as your FICO score. In my experience, the insurance score is more forgiving.

An insurance score includes:

  • Payment history
  • Bankruptcy, foreclosures and collection activity
  • Length of credit history
  • Amount of outstanding debt in relation to credit limits
  • Types of credit in use (i.e. mortgages, installment loans)
  • Number of new applications for credit

Eight tips to help you improve your insurance score:

  1. Pay your bills on time. Late payments hurt, on-time payments help.
  2. Keep your credit account balances at 75 percent of total limit or less.
  3. Avoid the new credit card discount temptation. Too many inquiries or new accounts in a short period will negatively impact your score.
  4. Get your free credit report at www.annualcreditreport.com at least once per year, review it for accuracy and take necessary steps to dispute any mistakes.
  5. There’s no quick fix. It takes time to build good credit.
  6. Have a plan. If your goal is to reduce your debt, consider ways to pay down debt without opening new accounts.
  7. If you have no credit, start establishing it today. Start small, a fewlow limit credit cards that you use and pay in full monthly will report positive history
  8. Resolve any outstanding balances before they go to collections.

In some cases this score will have more of an impact than an accident or violation.  I encourage you to set a date on your calendar each year to review your credit report and take action. If you’ve improved your credit score since the last time you took out insurance, you should shop. There are lower premiums waiting!

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