Credit Score

When thinking about your credit score, insurance premiums probably don’t come to mind. But your credit score can actually affect your insurance premiums, and it’s important to know how.

In order to maintain control over your financial life, it’s important to fully understand every aspect of it. This includes knowing which factors are interrelated, and how. But when it comes to your credit score affecting health insurance premiums, many people are clueless.

When you apply for an insurance policy, many factors go into the process of deciding what kind of monthly payment you will be charged. But more often than not, the insurance company first pulls your credit score to know a little more about you. What happens then is simple: if your credit score is low, you will be charged a higher insurance premium. If your credit score is high, you will be offered a health insurance policy with a lower premium. Of course, this is just one of many criteria that are considered when deciding a person’s premium, but it can have more of an affect than you would think.

Insurance companies do not look at your credit score in a normal sense, as a mortgage lender would examine it when evaluating a mortgage application. Instead, they look at something developed specifically for the insurance industry, known as your “insurance score.” This score is different than your traditional Fair Isaac Corporation (FICO) score, though the two are generally correlated. If you know your FICO score is low, your insurance score most likely is as well.

So what is this insurance score? It deals with areas of your credit directly applicable to the insurance industry. Most people do not know their insurance credit score, but it can be purchased, along with a copy of your report, from a company called True Credit. This company provides insurance credit scores to individuals who are curious about their chances for a low insurance premium, what they deserve, and what to expect.

If you have a low credit score and a low insurance credit score, however, all hope for a low health insurance premium is not lost. Chances are you do not want to pay more than you have to for your insurance premiums, and while this is a problem that can be difficult to get around, there are other things you can possibly do to lower your insurance premiums.

In the short-term, you may want to look into different insurance options and spend some time shopping around, to make sure you are getting the best rate available to you on the market. Rates can vary enormously between insurance companies. Another way for lower monthly premiums is to raise the deductible of your health insurance policy.

But the best thing you can do to improve your insurance credit score and become eligible for a lower health insurance premium is to work on improving your credit score. Get on a regular payment schedule with your creditors, and do your best to reduce any outstanding balances you have on your credit accounts. Your credit score can begin to improve after just a few months and lower health insurance premiums may become available to you.