How Does a Financial Stability Discount Affect My Insurance Rates?

Many insurance companies state that they use credit scores to determine rates if you look closely through your insurance paperwork. Using credit scores helps insurance companies determine the likelihood of future claims. In total 49 states allow insurance companies to use financial stability as a discount in calculating rates; the only state that prohibits it is California.

How is the Financial Stability Discount Determined?

Companies that use the financial stability discount use a scoring system that is kept hidden from the public. What is evident is that the system does not use your true credit score but your payments are influenced and based on how high or low your score is. When insurance companies check your credit score it does not take a hit as it is considered a soft hit. A good rule of thumb is to keep your credit as high as possible in order to take advantage of the financial stability discount.

Why Do Insurance Companies Need My Credit Score?

Insurance companies are constantly determining new ways of predicting the probability of future claims. If a potential customer is in a high risk category for a claim, the higher the premium will be for car insurance. Studies have shown that folks with lower scores have higher chances of filing a claim. Some feel that this is a stereotype but insurance carriers have been using this system to full effect.

How Does Financial Stability Discount Affect My Premiums

The financial stability discount can have a significant impact on insurance rates. The difference in price from best scores to the lowest can be hundreds of dollars if not into the thousands. Taking an advantage of this discount can lower insurance rates for people who have a good credit history. Insurance carriers use a tiered system to figure out the amount of discounts that will be received. The higher the credit score, the higher the tier, meaning you could be saving hundreds of dollars. Alternately if your credit score is low, the insurance carrier will place in you in a lower tier where insurance premiums will be much higher.

What Personal Information is Required by the Insurance Company?

Your name, birth date, and address are required to for an insurance company to determine your score and offer the financial stability discount. It is optional to provide your social security number. If you do not wish to provide it, the insurance company may still pull it up using your other personal information. If there has been a recent address change the insurance company will not be able to access your records unless you provide them with a social security number. It is possible to benefit from this if you have a bad credit score and you do not provide you social security number as the insurance carrier may rate you higher for the financial stability discount. For folks who have a good credit score, it is beneficial to provide their SSN as the discount will greatly reduce insurance premium costs. Keep in mind that some insurance companies will not allow new policies unless a SSN is provided.

Which Policies Are Affected by the Insurance Credit Score?

If the insurance company is using the financial stability discount it will affect every policy that you have with them including car, RV, boat, home, and motorcycle. You can check whether your policy is affected by your credit score in the paperwork that is provided by your insurance carrier. You can also contact your agent to find out if your credit score is affecting your premiums.

It is important to keep your credit as high as possible as it affects many aspects of your financial life. Even if you do not have a satisfactory score currently it is possible to improve it. Insurance companies check your score during renewal periods to see whether your credit score has been dropping or improving. Even if your credit score is low there are other discounts that may be available that will help in lowering insurance costs, make sure to do a thorough research and contact your agent if you have any questions.

There are many useful tips and advice on car insurance online, so make sure to do your research before making a purchase.

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