What Does Your Credit Score Have To Do With Insurance?

March 14, 2012 at 11:48 AM | Posted in Auto, Home, Insurance Policy, Insurance Scoring, Regulations | Leave a comment
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The Fair Credit Reporting Act (FCRA) allows insurers to obtain credit reports for use in conjunction with their underwriting guidelines. Insurance scoring is based on the belief that there is a direct statistical relationship between financial stability and risk. In other words, the higher a person’s insurance score, the less likely they are to use their insurance for small, frequent claims. The insurance industry states these scores help them issue new and renewal insurance policies based on objective, accurate, and consistent information. 

An insurance score is based on information contained in consumer credit reports from Equifax, Experian, and Trans Union and used in conjunction with driving records, loss history, and application information to determine one’s insurance risk. Some insurance companies use this information to determine what rating platform to apply to an insured, while others may decline to write insurance all together if the insurance score does not meet their underwriting guidelines. 

In Massachusetts, insurance scoring has been required for Homeowner insurance for several years now. However, it is not yet being used for Auto insurance as it is in other states. 

Although we are not provided with your actual score, as a Massachusetts resident, you are entitled to one free credit report a year. You can obtain your free report by visiting www.AnnualCreditReport.com.

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