You know how important your credit score is. It is required when you apply for new credit, new credit cards and also sometimes when you are looking for a job. Insurance companies also look at your score when they want to determine what premium they must charge from you. If you have a low credit score you will end up paying more than what you would pay if you had a good score.
Relation between credit score and insurance
Insurers say there is a clear and distinct relation between your credit score and insurance. Those of you who have a low score are the ones who are likely to make more insurance claims than those who have a good score. Having a good score means you are a responsible debtor. This in return makes you a responsible person altogether and hence that means you are going to be responsible with your car and other properties. This is why you can be considered as a safe customer.
Critics' point of view
Now everything has a critic’s point of view. Critics think that it would be unfair on the young and minorities if insurance premiums were based on credit scores. They are not likely to have good credit and hence such a practice would not allow them to buy insurance either. However, the credit score that the insurance companies use is not the ones typically used by banks. They use a score that is specific to the insurance industry.
FRCA and Insurance
According to the Fair Credit Reporting Act (FCRA), if your insurance company gives you high quotes based on what your credit score looks like, they are supposed to notify you of the fact. They need to cite the reason why your premium has been quoted high. You will also be entitled to a free copy of your credit report. If you find that the information in your report was wrong, you may dispute the credit report with the credit bureaus and then request a new insurance quote from the company. Make sure you attach the dispute letter.
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