While a large component of your insurance premium depends on the characteristics of the coverage such as your dwelling location, risk factors, and the like; some of that depends on your credit score as well. Just this past June, the Supreme Court ruled that insurers are allowed to charge more for insurance for less credit worthy people and they don’t have to tell them. According to Fair Isaac Corp, the originators of the FICO score, 90% of insurers use a credit score as part of the equation to calculate insurance premiums. In fact, according to Claire Wilkinson of the Insurance Information Institute, “studies show that how people manage credit is a good predictor of insurance risk.”
Whether or not you agree with the practice or the theory, it’s there and it’s held up in court. So, if your credit score is low, take some steps to boost it and you’ll see it pay dividends when it comes to your insurance premiums.
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