Last week we learned that the number one reason a consumer credit score matters is The Money You Borrow. We know that more marriages are broken up due to financial reasons than any other single cause and we learned that interest rates are determined by credit scores. Our credit score will be either saving or costing us thousands of dollars over our lifetime.
What then would rank as the second most important reason that a consumer credit score matters? Pretty simply.........The Money You Spend on Insurance! Insurance companies now factor credit scores into the premiums that they charge. High score equals = surprise, surprise- LOW RATES!. Low credit scores equal = HIGH RATES! This sounds very similar to interest rates doesn't it? A credit score is key.
Some insurance agents I interviewed indicated that the credit score is the first item in underwriting and works sort of like this. Premiums cannot be determined until the insurance company knows what STALL to put you in.
- Excellent credit score.
- Good credit score.
- Average credit score.
- Bad/below average credit score.
It doesn't matter whether you have reasons for your credit issues (divorce, lost job, medical, business shut down, stupid purchases, etc.) or even if you have a perfect driving record. You will be placed in a STALL and then the rest of the underwriting takes place.
During research for my book, "Credit Scores and the Top 10 Strategies to Increase Them Fast", I discovered this fact. The Kansas Insurance Department's online survey...showed that 454 out of 520 people participating in the survey reported their insurance rates increased in the past 12 months. And 267 participating in the survey said they were told (by the insurance company) credit scoring was a factor in their insurance premium increases.
58.8% of the premium increases were not claim related but CREDIT SCORE related.
Doesn't that 58.8% figure just make your day? Yeah, me too.