What is an insurance score? An insurance score is similar to your credit score in that it is based on your credit history. It is used by insurance companies to predict the potential for future losses, much like a credit score is used by financial institutions to predict your repayment. Today nearly all insurance companies use your insurance score, along with a number of other factors like age, gender, marital status, zip code, etcetera to determine your rate. Generally speaking, people who have high (good) insurance scores receive lower insurance rates. Insurance companies can use insurance scores so that more people can get better rates.
An insurance score is composed of the following: payment history; bankruptcy, foreclosures and collection activity; length of credit history, amount of outstanding debt in relation to credit limits; types of credit in use (i.e. mortgages, installment loans); number of new applications for credit.
I have included ten tips to help you improve your insurance score.
- Pay your bills on time. Timeliness in paying your bills improves your score.
- Manage your outstanding balances. As a rule of thumb, maintain account balances at least seventy-five percent below your available credit.
- Avoid excessive inquiries to your credit reports. Too many inquiries may negatively impact your score.
- Limit the number of credit accounts. Your access to excessive unused credit could result in too much debt.
- Review your credit report regularly. Know what is on your credit report, and take necessary steps to dispute any inaccuracies.
- Avoid ‘quick’ credit fixes. Good credit is built over time.
- Manage your debt consolidation. Consider how to effectively pay down your debt without generating more credit activity.
- Limit the amount of new debt you take on. Too many new loans or credit accounts opened in a short amount of time can negatively effect your credit rating.
- Establish credit if you do not have a long track record. A longer credit history has a positive impact on your score.
- Work with your creditors. Resolve outstanding balances before they are turned over to a debt collector