Wondering what too many credit cards has to do with the limb that landed on your roof? More than you’d think, it turns out.
Insurers claim the use of credit-based insurance scores is fair and actually works in favor of fiscally responsible consumers. Most people expect the cost of homeowners insurance to go up after a claim is filed. But it may surprise you to know that how good you are at managing your finances can have just as big an effect on your premium as the tree that fell on your house.
Insurers look to your credit history to calculate an insurance score that’s used to judge how much of a financial risk you are. The lower the score, the higher the risk—and the higher the premium you’ll likely pay on your homeowners insurance. Don’t despair. There are strategies, including paying bills on time, that can help improve your insurance score.
How your insurance score is calculated
Your insurance score starts with your credit report, which provides a history of your credit use. What credit cards and loans do you have? What are the balances? How promptly do you pay? Your report also includes information gleaned from public records such as bankruptcies and liens. FICO is the best-known company that turns the information in credit reports into credit scores. FICO credit scores range from 300 to 850.
Insurers are less concerned than lenders about your ability to pay back a specific amount than your overall ability to manage money, says Allstate spokesman Adam Shores, especially whether you make late payments and how long since delinquencies took place. Your insurance claims history, as recorded in your CLUE report, also affects your insurance score. So can your age, the construction of your house, and whether you’ve installed smoke detectors and other safety equipment.
Your claims history lives on in CLUE
The CLUE Personal Property report, which pertains to homeowners insurance, is divided into two parts: your personal record of claims (“Claims for the Subject”) and the claims on your home (“Claims History for Risk”). The number of claims in either section will affect whether you can get insurance for your home, how much coverage you can get, and how much you’ll pay in premiums. If you’re turned down for homeowners insurance because of information in your CLUE report, your insurance company is required to let you know why you were rejected.
Since the database is used by most insurance companies, your claims history follows you from one insurer to another. Actual claims, as opposed to inquiries, remain in the CLUE database for seven years from the date you filed them.
After one year of being open for business, Nothnagle Insurance Agency was ranked as the #2 Allstate office in the region! We offer competitive rates and can further explain to you how you can improve your score and save time and money using Nothnagle Insurance Agency. Contact us today for more information.