Your credit score is a three-digit number between 300 and 850 based on how much debt you have, how often you pay your bills on time, your credit history length and other factors. Your credit history is often used by lenders when they decide whether you qualify for a loan.
If you’re applying for insurance in Missouri, you may hear that your credit has something to do with insurance. In fact, there are many misconceptions about credit and insurance rates.
If you pay your insurance premiums on time, your score will not be negatively impacted. If you are applying for insurance or a loan and apply to multiple places, you may experience a slight and very temporary dip on your score because there will be multiple inquiries.
It’s important to get an affordable insurance solution because not paying your insurance premiums on time can impact your credit score. Any time you’re late with your bills or paying your debt payments, you’ll get a ding in your credit history.
Is insurance based on your credit score? At David Pope Insurance Services, LLC, we get asked this question a lot. The answer is both yes and no. Credit scores are not used to determine whether you can pay your premiums each month, but your history may be used to determine your likelihood of making an insurance claim.
Statistics show that insurance clients with higher credit scores are less likely to file insurance claims, which may mean insurers are willing to offer better rates to clients with better scores. Customers who have insufficient credit histories or who have very low credit scores in the 300s and 400s may be quoted higher rates. In some cases, they may have a hard time securing coverage in general.
That said, credit scores are used differently for loans and insurance. A Missouri customer may have qualified for financing, for instance, but gotten denied insurance. In addition, it’s important to keep in mind that “credit scores” may mean different things in insurance and financial industries. Some larger insurance carriers may combine credit scores from organizations such as Fair, Isaac and Co. (FICO) along with other customer data to create a special “insurance score.” This number is used like credit scores in deciding what to charge customers for coverage.
If you’re looking for insurance in Missouri, Arkansas, Iowa or Kansas you may wish to get your credit score from credit bureaus to determine how likely you are to get a good insurance rate. Low scores can be improved by paying down your debts and paying your bills on time before applying for insurance quotes.
Of course, it can take months or years to get a better credit score. If you need coverage now, get a free quote from David Pope Insurance. We’ve been in the insurance business for over two decades, and our team will work hard to bring you flexible solutions that work for your life and needs. Even if your credit score isn’t good, we can offer advice about your options.