The Importance of Your Credit Score

credit

Many people do not realize just how their credit scores may affect their day to day activities.  Good credit history can result in the following - obtaining that highly sought after apartment, receiving lower interest rates on credit cards, loans and mortgages and, surprising to many, receiving lower rates on your insurance!  According to the Insurance Information Institute, good credit will give you the upper hand so, it is best to work on your credit score if it can be improved.

With a decent credit score, renters will have an easier time finding an apartment, especially in the metropolitan areas like Boston, New York and Seattle.  (More rental options are available to the good creditor.)  Many times, landlords insist on credit and background checks before an apartment is shown!

Homebuyers with good credit also have an advantage.  They may be  the first to view properties on the market-giving them the inside edge.  Once an apartment is rented or a home is purchased, good credit can lower your homeowner or renters’  insurance rates.  Despite the fact that insurance costs are between 5 to 7 percent of a typical housing payment, you still want to save as much money as you can for other things that come up.  A majority of insurance carriers will give discounts to those with good credit whether it be for home, apartment, auto, commercial, life or health.  Find out if you’re eligible by calling your insurance carrier.

Credit scores differ from insurance scores.  Credit scores predict credit delinquency where as, insurance scores predict insurance losses.  Both are calculated from information in a credit report, such as, outstanding debt, bankruptcies, length of credit history, collections, new applications for credit, number of credit accounts in use, and timeliness of debt repayment.  Insurers or scoring agencies then calculate the insurance or credit score by assigning differing weights to the favorable or unfavorable information in the credit report.  (Information such as income, ethnic group, age, gender, disability, religion, address, marital status, and nationality are not considered when calculating an insurance score.)

Credit and insurance scores measure how well individuals manage their money–not based on how much money they make.  Studies have shown that how a person manages his or her financial affairs is a good indicator of insurance claims.  Statistically, people with a low insurance score are more likely to file a claim.  The good news is most people do have good credit and most people pay less for their insurance due to the fact that insurance scores are considered!

The Fair Credit Reporting Act requires each of the nationwide consumer reporting companies–Equifax, Experian, and Transunion to provide you with a free copy of your credit report, at your request, once every 12 months.  For more information, go to the Federal Trade Commission website on credit.  We hope this information was helpful in letting you know what can be affected by your credit score so, it is important to find out where you stand.