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				<div class="et_pb_text_inner">How Your Credit Score Impacts Your Property Insurance Premium</div>
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				<div class="et_pb_text_inner"><p>&nbsp;<br />
When purchasing or renewing a homeowner’s insurance policy, your credit score plays an important role in your premium costs, and even in the ability to buy an insurance policy. Most insurance carriers use a credit-based insurance score to calculate your premium payment. Here is what you should know about how insurance companies use your credit score and how you can improve it.<br />
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What Is a Credit-Based Insurance Score?<br />
While credit-based insurance scores share traits with standard credit scores, they are not calculated the same way. Insurance scores consider only some of the factors that go into a regular credit score.<br />
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Beginning in the 1990s, insurance companies began using credit scores to predict risk and calculate premium costs. According to the credit-scoring agency, FICO, about 85 percent of insurance companies use credit-based scores when determining premium rates. Some reports show that people with bad credit can pay nearly twice as much for home insurance, compared to people with good credit. If your credit is really bad, you could be denied a policy.<br />
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Two important factors insurance companies use to figure your credit score are payment history and hard inquiries. Hard inquiries involve lenders, like when you apply for a credit card or a loan. A good way to keep hard inquiries from hurting your credit score is to make all your requests within a 45-day period. Within this period, they treat all inquiries as one.<br />
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What Determines Your Credit Score? Credit scores aren&#8217;t an exact science. Lenders and credit agencies use their own metrics. For example, LexisNexis Property Insurance Scores uses this ranking:<br />
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Good: 776 to 997<br />
Average: 626 to 775<br />
Below Average: 501 to 625<br />
Less Desirable: Under 500<br />
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Even though credit scores can vary between agencies, most are similar to the above ranges.<br />
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Other factors that affect your credit score include level of debt, length and usage of your credit accounts, and your credit limits. The three credit bureaus, Experian, Equifax and TransUnion, rate these scores in different ways. Where one company ranks payment history as 40 percent of your score, another may only factor it in at 30 percent. Another difference is that things like your work or income history don’t affect your insurance score like they do your credit score.<br />
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If you want to know if your insurance company used your credit report, you can contact your agent and ask them. If your credit report had a bad effect on your rate, the Fair Credit Reporting Act Action Notification should alert you.<br />
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You should also be aware of your state&#8217;s laws regarding the use of credit reports to calculate rates. In Maryland and Hawaii, for example, insurers are legally prohibited from using your score to raise your homeowner’s premium. Other states may allow that, but they won&#8217;t use your credit report to drop you or deny coverage.<br />
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How to Improve Your Credit Score<br />
There are simple steps you can take to improve your credit score. A great starting point is to get your debt usage under control. As a rule of thumb, keep your usage to 30 percent or less of your total available credit.<br />
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You&#8217;ll also want to check and make sure your credit limit is fully reported. It could affect your rates if the credit bureau runs a background check and finds a blank spot for your card&#8217;s credit limit. Agencies only use reports with known credit limits as factors in insurance scores.<br />
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Another way to improve your credit score is to have a good grip on your payment history. Pay your bills on time and dispute any errors in your account. Many credit card companies will waive a one-time mistake. Try to make large payments when possible. Not many people can wipe out all of their debt at one time, but even if you can pay your balance down 10 percent each payment, you&#8217;ll see some good changes in your credit score.<br />
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You might see a lot of sites offering free credit reports, but most of them are not free. You can check your credit report once a year at no cost at annualcreditreport.com. Equifax, Experian and Transunion created the site jointly to comply with the Fair Credit Reporting Act. You can get your credit report from all three of the major bureaus for free and without hurting your credit score. This allows you to make sure your report is accurate. Credit report errors are common. Being aware of your credit status can help avoid them.<br />
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Another option, if you feel your home insurance rates are too high due to your credit score, is to shop around. When insurers look at someone&#8217;s credit-based insurance score, it&#8217;s considered a soft inquiry. Soft inquiries do not hurt your credit score like hard inquiries can, so looking at what different agencies have to offer you is in your favor.<br />
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To read the entire article please click here.</p>
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