It pays to have good credit history. If you have good credit you tend to get the best rates for purchasing a car, having a low interest rate for loans, and getting the better rates for car insurance. Consumers who pay their bills and loans tend to have these types of benefits. A number of homeowner insurers weigh your credit history in making underwriting decisions, confirms Selective Insurance spokeswoman Cynthia B. Heismeyer who explains why.



?In insurance scores, it is either based partially or wholly on your credit score. This information helps insurer's asses risk and charge the appropriate fee based on that level of risk? observers Heismeyer, Selective Insurance's assistant vice president of corporate communications.

?People who have poor insurance scores are more likely to file a claim? notes Heismeyer. Then again homeowner rates are usually based on the characteristics of the structure itself. Currently the insurance industry is now shifting the focus to include the characteristics of the occupants, and insurance scores are one of those factors.?

Heismeyer says that a credit-based ?insurance score? derived from a consumer credit report is usually used to predict how often he or she is likely to file claims, or how expensive those claims will be.

Heismeyer pointed out that the findings of insurance regulators, universities, independent auditors and insurance companies all have shown that an individual's credit history is a proven and strong indicator of how likely that person is to file a future claim.

Here are some basic facts about credit-based insurance scores, according to the Insurance Information Institute, of New York. They allow insurers to charge lower premiums to customers who are better risks. These types of scores are totally objective and ?blind? because insurance scores never factor in the consumers income, race, address, marital status, age or nationality. They promote competition, which means more choices for consumers. These are some of the factors that affect a person's insurance score.

Chubb Group of Insurance Companies doesn't use credit-based scores in homeowners insurance underwriting decisions, but Chubb spokesman Mark Schussel points out that his company has ?other ways of determining the acceptability of a risk.? Chubb goes ?beyond what's contained in the insurance application? said Schussel who then provides an example.

For instance, Schussel says, that the application does not provide enough details of the interior of the home as well as the concentrated exposures a home faces and what steps that a customer has to take in order to remedy those exposures. That is why we visit many of the homes that we insure.

The concept of credit-based insurance scores are ?blind? and objective, points out Lynn Knauf, director of personal lines for the Property Casualty Insurance Association of America, in Des Plaines, ILL. She stressed that credit based insurance scores don't consider a consumers race, nationality, income, marital status or location.

The benefits for credit scores in the homeowners insurance equations. Is that they are enabling insurers to offer many more pricing levels than before, and with people having a good credit based insurance scores can get lower premiums on their homeowners insurance than they could have had 10 years ago before credit scoring came to the forefront. The addition of credit scoring also gives the homeowners insurance company a clearer idea on how to price a particular risk and in the process give consumers the assurance needed that they are not paying more than what they should for the coverage.

These types of fiscal responsible consumers who have solid credit histories have fewer losses than those with poor or bad financial track records. From the insurer's standpoint, credit information serves as an indicator as to how well a person manages financial risk. A person who keeps his finances in check tend to keep his or her dwelling in great shape, and probably drive more safely as well. In addition, homeowners insurance losses for people with bad credit tend to run much higher compared to the consumers with the best insurance credit scores.

Personal credit reports are available from several organizations, including Experian, Equifax and TransUnion. Checking up on your credit and clearing up inaccuracies should be done as often as possible; it is no different than to check your bank account or credit card account everyday. So as much as possible build up good credit so that you will be able to get those lower rates those homeowners insurance companies offer.

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