Insurance Rates and Credit Score - What's the Deal?

The first point that must be illustrated on the topic of credit and insurance scoring is why credit history and credit scores would be important to insurance companies. It’s important to have at least a surface level idea of how credit scoring and insurance rates are related because it does affect premiums.

What Does Credit Have Anything To Do With Insurance?

Using information from credit bureaus is not the same as calculating insurance scores. However, underwriters have used information from credit reports for years now to better assess the risk a potential policyholder has to the insurance company. The credit score of an individual is not the only factor used to calculate a premium; there are many other variables that come into consideration.

Credit scores allow insurance companies to view an estimated snap shot of the likelihood a policyholder will be a good investment. The main function of credit reports is to provide a clear picture of a person’s history as it relates to his or her ability to pay bills and maintain stable finances.