Credit Scores and Insurance Rates: What is a good credit score and how does it change my insurance?
What Is a Good Credit Score?
If you want a low rate when you borrow money, such as when buying a car or a home, you need as high a credit score as possible. If yours is 650 or higher, you will have the chance you want to secure that low-interest loan.
A score of 620 to 650 isn’t too bad either. But when your score drops below 620, you may have to settle for a higher interest rate because you will be considered a credit risk. You may even get refused for a loan.
How Does It Change My Insurance?
However, most people don’t know that their credit rate can also affect their insurance rates, especially car and homeowners insurance. Health and life insurance may be affected in the near future, but not right now.
In a recent survey conducted by the research firm Conning & Co., 92% of all car insurance companies use credit information to decide on the rate the insurer is to pay. An increasing number of homeowners’ insurers are doing the same. They have also been known to use credit scores to set the premium.
Although your credit has yet to be used for health and life underwriters, some believe the trend is not far away. Before you buy either, you may want to ask if they will be using your credit scores to determine your rates.