When it comes to applying for insurance you may not give your credit much thought–but you should. Many insurance companies consider credit scores as a part of their rating system to help determine insurance risk. If you are searching for low cost auto or home insurance, you will want to build and maintain good credit to keep your insurance rates low.
Your credit score is an analysis of how responsible you are as a borrower of money and payer of debt. This number can range anywhere from 300 to 850. The higher the number, the more reliable you appear to a potential lender, or, in this case, insurance provider. There are three major credit bureaus that provide credit scores: Experian, Equifax and Transunion. All of these companies use slightly different scoring models, but they consider many of the same credit score factors when determining credit scores.
There are many steps you can take to secure a solid credit score. First off, you want to make sure to establish a reasonable line of credit and use it actively to help build a profile. Though it is not always advisable, it is optimal to start this process as early as possible because the length of your credit history can affect your score. Once establishing a line of credit, it is vital to make all of your payments in a timely manner. Missing a payment deadline or paying below the minimum required payment for a given month would negatively impact your score. Nevertheless, this doesn’t mean paying the minimum is always the best option, as this behavior can lead to increased debt.
Any credit line you apply for will come with a monthly limit that you should not exceed. However, even if you are staying below this amount, the percentage at which you are regularly using your credit does impact your score.
Lastly, it is sensible to keep inquiries on your credit to a minimum. An inquiry or “hit” occurs when a vendor checks your credit score. If this occurs often, it can be a sign to lenders that you are accumulating too much debt and may be taking on expenses outside of your budget.
Don’t forget you can monitor your credit score and request a monthly report via a credit monitoring service. This way, you can have a more active roll in maintaining your score while keeping an eye out for crucial errors or fraudulent activity.
Credit repair takes time. Don’t wait to seek out home or auto insurance until after you’ve repaired your credit score. TSC>Direct is a low cost insurance provider serving New York residents. Click here to get a free auto or home insurance quote!