Insurance scoring is a system that is used by various insurance companies to predict risk. It is not the same thing as a credit score; however, it does use a lot of the same characteristics. Many insurance companies include credit-based insurance scoring as one of the factors that goes in to the final rate that you will be charged by the insurance company. As a result, monitoring your credit report and increasing your credit score can actually impact the pricing of your homeowners and automobile insurance.
Unfortunately, I can’t tell you how each company comes up with their insurance credit scoring models since that information is top-secret and proprietary to each individual insurance company. However, I can tell you that it is becoming extremely important to monitor what is listed in your credit report.
I realize that there are a lot of catchy jingles on commercials these days to get your attention and attract your clicks online. Some of these websites claim to offer free credit reports, scores, or monitoring. However, the official site that was established by the Federal Trade Commission (FTC) to help consumers obtain their free credit report is www.annualcreditreport.com.
This website will allow you to monitor all three (3) credit bureaus: Equifax, TransUnion, and Experian. The information in each file can be different so it is important to check all three bureaus on a regular basis.
The Fair Credit Reporting Act (FCRA) requires each of the nationwide consumer reporting companies to provide you with a free copy of your credit report, at your request, once every 12 months. A fun and cost effective way to do this is to order a report from Equifax in January, TransUnion in May, and Experian in September. The actual order is not important. The important part is that you are ordering a free report from a different credit bureau every four (4) months. That way it is totally free, and a proactive approach for the entire year rather than checking once a year. Periodically checking your credit report will be more beneficial in the long run.
In conclusion, work to try to increase your credit score so that you can decrease your insurance premiums.