Did you know that homeowners with less than perfect credit pay on average 85-92% more on their insurance policy than those with high credit scores? According to Bankrate.com and insuranceQuotes.com homeowners with fair credit pay about 29% more than those with excellent credit.
“This is another example of why credit is such an important part of your financial life,” said Laura Adams, senior analyst with insuranceQuotes.com. She goes on to say, “Maintaining a good credit history suggest that you’re a less risky customer and can lead to several hundred dollars in annual homeowner’s insurance savings.”
This is not just for homeowners. According to Clarence Smith the former assistant vice-president at Conning & Co., “A consumer with bad credit is going to pay 20-50% more in auto insurance premiums than a person who has good credit”. Elizabeth Moseley of III says, “Insurance is based on risk, and research has shown that individuals who tend not to pay their bills on time — and then get low credit scores — file more claims, and that those claims are the most expensive.” When insurers get stuck with a bad risk, she adds, other policyholders end up footing the bill.
But she says it is still not all bad. “A lot of people benefit from it. Two-thirds of policy holders have lower premiums because of their good credit record.”
If you are unsure of your credit situation and are thinking of changing insurance companies it is best to obtain a copy of your credit report. If you find that your credit it is not great it is a good idea to stay with your current carrier to keep your rates from going up.
You can also take a few steps to improve your credit:
- Eliminate “nuisance balances”: According to John Ulzheimer, president of consumer education for SmartCredit.com “A good way to improve your score is to eliminate nuisance balances, those are small balances you have on a number of credit cards.” So before tackling your higher balance ones try to get rid of having multiple cards with balances.
- Leave good old dept on your report: When you pay something off leave it on your credit report. When things are paid off people quickly want it removed but in actuality showing you had a debt and paid it off in a timely manner helps your credit.
- Pay attention to balances: Always try to pay more than the minimum. It is ideal to keep your balance at less than 10% of the limit but that is not always possible. Try to pay double your minimum requirement or more if you can. This will help improve your credit score and also save you on interest.
- Don’t neglect bills for a down payment: If you are about to make a big purchase don’t stop paying your bills or pay less to get the cash together. Try and budget your time frame and available cash to work it out properly.
- Don’t show risk: When you miss payments or start charging more than normal you may see your score decline. This shows that something else could be going on and you will negatively impact your score.
- Use a calendar: Anytime that you apply for credit there will be a small dip in your score. Try and do as much as possible at once and not let a lot of time go by. This will help keep your rates low and your score high.
- Relax: Don’t over obsess. There are ways to fix and repair your credit. A lot of companies will also work with you if you fall on hard times by offering reduced rates, settlements and more.