Know-How Credit Scores Affect The Home Insurance Rates
Introduction:
Maintaining a healthy credit score is highly important not just for availing loans at lower interest rates or for getting a credit card. A good credit score is also very important for another reason- it can help you get a cheaper home insurance policy. The homeowners insurance companies sometimes use the credit score of an individual as a factor to determine the insurance rates.
A bad credit score often leads to higher insurance rates because people with lower credit scores are considered to be high-risk customers. In such cases, the insurance companies feel that there is a greater chance that these customers will make claims. This is a general practice adopted by insurance companies yet many people are still unaware of the fact that why and how credit score impacts homeowners insurance in Laredo. Do not worry, we in this article will discuss the same so that you can be aware of how important it is to have a good credit score.
In What Way Credit Score Hampers The Insurance Premium Rates:
You must be wondering about the credit score which depicts your credit history and based on which the lender or the creditor decides whether to lend you money or not. If you are thinking so, then you are partially right. Your credit score does depict your credit history but in case of insurance rates, the credit score which you are talking about is Fair Isaac Corporation Score and here instead of it we are talking about insurance score popularly known as CBI- credit based insurance score.
An insurance score is created by taking into consideration various factors such as your credit history, claims you have made in the past, your current assets and liability, etc. This information is then used to create an insurance risk profile for every customer and this way the insurance company undertakes the risk and decides the insurance premium rates.
Effect of Credit Score on Insurance Rates and Other Factors That Affects The Credit Score:
The higher the credit score, the lower will be the insurance rates and vice versa. Maintaining a decent credit score is, therefore, important for every homeowner who wishes to save on the heavy premiums. However, there are a few other factors as well which affect the credit score and subsequently the insurance premium rates. Some of these factors have been discussed below:
Length of credit history.
Having a long and healthy credit history will favorably support the credit score. It squared off the negative footprints which were been there since so many years and gradually the credit score improved. This benefits your present as well as future.
Bank and credit accounts.
Having several accounts in good standing is an indication of financial stability and shows good management of credit. This will help you in maintaining a good insurance score and save some bucks on the premium.
Late payments.
Making late payments or failure to make the minimum payment on time or lapsing of premium reflects badly on the credit score and thus, increases the insurance premium rates. So always pay your bills on time to keep a good credit history as well as save money .
High outstanding balances.
Having large outstanding balances also has a negative impact on the credit score because it shows that you are not using your credit responsibly and you may have difficulty in making the payments. This will lead to higher insurance rates.
Credit mix.
Insurance companies often evaluate the credit mix to get an idea of your financial stability. A good mix of different types of credit accounts (such as mortgage, auto loan, etc.) is usually considered to be a positive factor.
Can I get homeowners insurance with bad credit?
The answer to this is a firm YES. You do get a home insurance policy even if you have bad credit but be prepared to pay a higher premium than people with a good credit score. Also, keep in mind that your credit score is just one of the many factors that are considered while calculating your home insurance rates. Some other important factors include the value of your home, the claims you have made in the past, your current assets and liability, etc.
Therefore, even if you have bad credit, you can still get a home insurance policy by shopping around and comparing different insurers.
Learn what is covered under homeowners insurance policy.
The Bottom Line:
Since you now know how essential it is to have a nice credit score for getting affordable options for homeowners insurance in Lubbock, make sure you maintain a healthy credit score. Also, keep in mind to compare the rates of different companies before buying a policy so that you can get the best deal possible.
And if you have any queries related to this or any other insurance policy, feel free to contact the insurance provider and get to know the best policy for you. Remember it is always advisable to be aware and informed about everything related to your insurance policy and no one other than your insurance agent can guide you better in this regard.
Thank You!