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5 Tips to Improve Your Credit Score—and Lower Your Insurance Premiums

by Posted in Auto Insurance, Homeowners Insurance Tagged , ,

When high prices make you feel financially pinched, you look for ways to save money on your expenses, including insurance premiums. One way to do this is to improve your credit score.

Even though they aren’t the same, there is a connection between credit scores and credit-based insurance scores, also known simply as insurance scores. As we explained in “How Your Credit Affects Your Insurance Premiums”:

“Credit-based insurance scores (or insurance scores) are ratings based on your consumer credit information. They use much of the same information to provide a rating as credit scores do—payment history, outstanding debt, pursuit of new credit, credit mix—but they are used to predict insurance losses. As with credit scores, the higher your insurance score the better, because, according to the Insurance Information Institute (iii.org), ‘Insurance claims tend to decline as credit scores improve.’”

And according to this Forbes Advisor article, drivers with bad credit may pay up to 42 percent more for their car insurance than those with good credit. Homeowners insurance rates are also affected by credit scores.

So let’s take a closer look at your credit score, since improving it just might save you money on your home and car insurance.

Credit score factors

A credit score is your credit history reduced to a number between 300 and 850. The higher the score, the better credit risk you are. Scores above 720 are considered good, and those below 630 are considered poor.

There are five components of a credit score:

  • Payment history
  • Amount you owe (“credit utilization”)
  • Length of credit history
  • Credit mix—what types of credit you have, such as credit cards, student loans, car loans, etc.
  • Hard inquiries for new credit—have you been trying to get a lot of new credit in a short period of time?

The most important of these factors are your payment history and credit utilization.

Five tips to improve your credit score

Though it may take a bit of time, it’s worth the effort to improve your credit score for both your financial health and as a way to lower your insurance premiums. Here are five tips to improve your credit score:

  1. First, check your credit report for errors and outdated information. By law, once a year you can request a credit report from the three main reporting agencies (Experian, Equifax, and TransUnion—go to AnnualCreditReport.com for more information). One study found that more than one quarter of consumers had at least one error on their reports that would make a difference in their credit score. Look for accounts that aren’t yours, on-time payments marked late, etc.
  2. Pay your bills on time. The most important and effective thing you can do to raise your credit score. Set up payment reminders or take advantage of auto pay. If you find you’re not going to be able to pay at least the minimum due, contact your creditor to see if they have hardship options available.
  3. Monitor your credit utilization. How much of your available credit are you using? Are your credit cards maxed out? Pay down high credit card balances when you get the chance. If you pay off a card, leave the account open, even if you don’t intend to use it. Accounts like this help with both credit utilization and length of credit history. Experts recommend keeping your credit utilization at no more than 30% of your available credit, preferably lower.
  4. Build a credit history. Some people have lower credit scores partly because they don’t have much of a credit history. If you have little to no credit history, build one by applying for a department store or gas credit card. These are usually easy to get. You may also choose to apply for a secured credit card. This card requires a deposit equal to your credit limit. Otherwise, it functions just like an unsecured credit card—you’ll need to pay your bill monthly (the deposit can’t be used to pay your bills, but usually you’ll get that money back when you’re done needing a secured card).
  5. Keep “hard” credit enquiries to a minimum. Even if you need to apply for credit to build a history, don’t try to open too many accounts in a short period of time. And if you need to shop for a car loan or mortgage, do so in a focused period of time.

No matter what your credit score, L & M Insurance Group can help you find the best deal on insurance

L & M Insurance Group partners with many different insurance companies, so whether you have good credit or bad credit, we can match you with auto and home insurance coverage at the most competitive price. Because we are an independent agency, we have more options to choose from than a captive agency does. Let our agents shop for your best insurance deal—call us at 813-672-4100, or click here to contact us online.

For more information:

How to Improve Your Credit Score

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How Your Credit Affects Your Insurance Premiums

by Posted in Auto Insurance, Homeowners Insurance, Uncategorized Tagged , , , , , ,

As you’re shopping for home or auto insurance, you might come across the concept of the credit-based insurance score, or simply the insurance score. Hmm, that’s odd. What does credit have to do with insurance risk, and how does it affect the cost of your insurance? Does having good or bad credit affect your insurance policy premiums?

Your Credit Score may affect the Price of your Insurance

Your credit score may be affecting how much you pay for insurance. Most homeowners and auto insurance companies in Florida use credit-based insurance scores as part of the process of setting their insurance rates.

Read on for the answers to five commonly asked questions about credit scores and insurance.

1. What’s the difference between credit score and insurance score?

Credit-based insurance scores (or insurance scores) are ratings based on your consumer credit information. They use much of the same information to provide a rating as credit scores do—payment history, outstanding debt, pursuit of new credit, credit mix—but they are used to predict insurance losses. As with credit scores, the higher your insurance score the better, because, according to the Insurance Information Institute (iii.org), “Insurance claims tend to decline as credit scores improve.”

2. Why do insurance companies use credit information to rate premiums?

Insurance scores were developed in the 1990s to help insurance companies more accurately underwrite and price insurance policies. Though they are not the only measure used to rate a policy (see below), the industry has determined that “…people who have low insurance scores, as a group, account for a high proportion of the dollars paid out in claims.” (Source: iii.org.) Experts speculate that the connection is behavioral—those who manage their money and credit well tend to manage other areas of their lives, such as maintaining their homes and vehicles, in a responsible way, which reduces risk.

Also according to iii.org, when insurance companies use credit-based insurance scores, many people (more than 50%) see lower insurance rates overall because insurance companies are able to price coverage that reflects risks more accurately.

3. Does it hurt my credit rating when an insurance company asks for my credit info? No. When an insurance company requests information about your credit, it’s not considered a “hard credit pull.” Hard credit inquiries result when you apply for a loan, mortgage, or credit card.

4. What other information is used to determine home and auto insurance premiums?

In addition to insurance scores, for auto coverage, insurance companies will use some combination of your geographical area, model of vehicle, accident history, age of drivers, driving records, insurance claims, and sometimes how many miles you drive in a year. For homeowners insurance, they will consider things like the home’s age and construction, cost to rebuild the structure in case of a total loss, location, proximity to water for firefighting, and flood risk.

5. How can I improve my credit/insurance score?

This is a great question since people with higher insurance scores usually pay somewhat less for their insurance. First, check your credit score yearly. By law, you’re entitled to one free credit report each year from the national credit reporting companies Equifax, Experian, and TransUnion. Read over your report and correct any errors that might be bringing your score down.

The best thing you can do to improve your credit score is to make your payments on time, including bills, taxes, and any fines or fees you need to pay. It also helps to pay off your credit card balances or keep them as low as possible. If you need to apply for a new credit card or loan, try to wait six months or so between applications—applying for too much credit at one time can temporarily lower your credit score.

Remember, if you do improve your credit score, make sure you compare insurance rates at renewal time. Don’t just assume your insurance premium will decrease.

Shop your insurance with an independent agency

Whether you have good credit or bad credit, L & M Insurance Group can help you find auto and home insurance coverage at the most affordable price. Because we are an independent agency, we write with many different insurance carriers and have more options to choose from than a captive agency. Let our agents shop for your best insurance deal—call us at 813-672-4100, or click here to contact us online.

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Got Great Credit? Let Us Save You Money on Your Auto and Home Insurance!

by Posted in Auto Insurance, Homeowners Insurance Tagged , , , Leave a comment

What does your credit score have to do with insurance rates? Plenty. Since the 1990s insurance companies have been using consumers’ credit scores to help set insurance premiums. Industry studies have indicated that using credit-based scores helps insurance companies better predict risk.

What does that mean for you? It means that if you have good credit, you’ll likely save money on your home and auto insurance.

“Just as insurance scores help insurance companies assess and price risks, so too can these scores help insurance customers—particularly if they are considered good risks,” according to the Insurance Information Institute (iii.org).

Insurance scores are different from credit scores, though they are both based on your credit report. And each insurance company makes those calculations a little differently. For an insurance score, “Emphasis is placed on those items associated with credit management patterns proven to correlate most closely with insurance risk, such as outstanding debt, length of credit history, late payments, collections and bankruptcies, and new applications for credit,” according to iii.org.

Therefore, the higher your insurance score, the lower your insurance rates.

What if your credit isn’t so good?

If your credit scores could be better, lower insurance rates are one more reason to improve them. If you want to improve your score, start by keeping a closer eye on it. Make sure there are no errors in your credit history. Make payments on time, avoid high “credit utilization” (the amount you owe divided by your credit limit), and don’t make too many applications for new credit. Remember, credit scores aren’t the only factor used in determining insurance rates. For car insurance, driving history and type of vehicle are also crucial. For homeowners insurance, your location, the size and age of your home, as well as your level of coverage will also affect your rates significantly. However, improving your credit score could make a significant difference in your insurance premiums. According to creditkarma.com, improving from one credit tier to the next can save you an average of 17 percent per year. And Consumer Reports noted that drivers who improved their credit score from the “good” level to the best paid an average of $214 less per year for their car insurance.

If you have good credit, let L & M Insurance Group help you reap the benefits with lower car and homeowners insurance rates. Call us today at 813-672-4100 for a free quote, or drop us an email. For more than 30 years, L & M Insurance Group has helped customers within Riverview, Brandon, Gibsonton, Apollo Beach and Tampa. We also work closely with many customers throughout Hillsborough County, Manatee County, Pinellas County, and Clearwater.