Do Insurance Companies Require a Credit Check?

One of the biggest fears most people have is that they won’t be able to qualify for something as important as insurance, due to their low credit scores.

Given the fact that creditors, banks and even employers are inevitable to run full credit checks on you before you can enter anything regarding money, or the risk of having a company or institution lose money, discovering that insurance companies do run credit checks, is a big stress all on its own.

Considering that credit checks can cause an insurance company to reject you, is the main reason why people don’t like the idea thereof to begin with.

Why do insurance companies run credit checks?

Insurance companies run credit checks because of risk assessors and studies that have proven that an individual with a bad credit score, is a good prediction of whether they will claim insurance, or not.

They usually also look at your financial history, and whether you have a record of making late payments that are more than 30 days late, which also adds to a better risk assessment.

The rates that you will get offered from insurance providers, however, is not solely based on your credit history. There are other variables that also get considered, such as the type of car you drive, your driving record, and even your place of residence.

All the above-mentioned information gets combined to determine your insurance premium rate, which must correlate with the potential claims, so the insurance company won’t be at a loss upon providing you with an insurance premium.

What can you do to receive lower premium rates from an insurance company?

The first thing you must do is make sure your credit score is in good condition, and if it’s not, implement ways to increase it as much as possible. Even if an insurance provider is informed about your low credit score, increasing it will assure them that you are financially stable and pose a lower risk of claiming insurance.

Keeping your driving record clean, along with paying all your bills on time and not making too much credit, are also ways to increase the probability of receiving a lower insurance premium.

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