If you make a late payment on one of your credit cards, chances are, it will eventually affect how much you pay in insurance premiums.
Insurance companies use insurance scores for underwriting decisions and to partially determine charges for premiums. An insurance score is a point system based on selected credit report characteristics. According to the American Insurance Association, most automobile, homeowners and other property insurers use this score to determine how likely it is you’ll file a claim and what rate they will offer you.
FICO, TransUnion and LexisNexis are among the major providers of insurance scores.
It is important to remember that your insurance score is not the same as your credit score.
For example, payment history makes up 40 percent of FICO’s insurance score, the amount of credit owed is 30 percent, length of credit history is 15 percent, new credit is 10 percent and mix of credit is 5 percent.
LexisNexis uses payment practices, adverse public records and collections (excluding medical), credit utilization, recent credit activity, length of credit and number and types of credit to determine your insurance score.
TransUnion’s scores are weighted toward the age of credit accounts and their stability, which includes a responsible mix and use of credit.
Four states – Massachusetts, California, Hawaii and Maryland don’t allow one or more types of insurers to use credit-based insurance scores.
“The insurance score is only one part of the insurance rating process. Address, age, type and number of vehicles and driving history are other factors that go into determining an insurance premium,” said Greg Magnus, insurance producer at E. R. Munro and Company.
For information on insurance and bonds, contact E. R. Munro and Company at 877-376-8676 or e-mail us at [email protected].
