How to Protect Or Improve Your Credit History
What can consumers do to improve their insurance score?
- Pay bills on time. Delinquent payments and collections can have a major negative impact on an insurance score.
- Keep balances low on unsecured revolving debt, such as credit cards. High outstanding debt can affect an insurance score.
- Apply for and open new credit accounts only as needed. Maintain the necessary minimum number of credit cards, as well as other credit accounts.
- Annually request a copy of your credit report. Review for accuracy and correct all errors in writing. Over time, responsible use of credit can increase a customer’s insurance score.
Know your credit history
There is a good chance your current or prospective insurance company will consider financial stability as part of its underwriting process. Insurance scores are based on information from consumer credit reports that insurers or statistical modelers get from the three major credit agencies: Equifax, Experian (formerly known as TRW) and TransUnion. Therefore, it is a good idea to review your credit history to make sure it is accurate.
The Fair Credit Reporting Act requires an insurance company to tell you if they have taken an “adverse action” against you, in whole or in part, because of your credit report information. If your company tells you that you have been adversely affected, they must also tell you the name of the national credit agency that supplied the information so that you can get a free copy of your credit report and correct any errors.
Take charge of your credit history
If your auto insurance company is using your insurance score to calculate your rates, you can take steps to improve your premiums.
- Get a copy of your credit report and correct any errors. Notify your insurance agent and company of any errors and advise them once the errors are corrected.
- Improve your credit history if you’ve had past credit problems. If your credit score is causing you to pay higher premiums, ask your auto insurer if they will re-evaluate you when your credit improves.