As consumers, we are constantly hearing about credit reports and how important these are to several transactions we complete all the time. Most of us realize they have become a requirement for loan applications, renting apartments or even turning on utilities. Surprisingly, a lot of homeowners aren’t aware they also have home insurance scores (IS), which positively or negatively affect credit reports. Learning more about IS and how they affect homeowners insurance in Texas could even make a huge difference in what you’ll be paying for coverage.
The Relationship Between Homeowners Insurance in Texas and Insurance Scores
What are Insurance Scores?
Insurance scores, also called insurance credit scores, are primarily derived from your current credit report at one or all three of the larger credit bureaus. Although credit reports have primarily been used when applying for an auto or home loan, insurance companies now believe there is valuable information within credit reports that can help to determine whether you might file an insurance claim for auto or home insurance. For further information, visit our quote form up top.
Consequently, 90 percent of insurance carriers now rely on credit reports for creating insurance scores. People with higher IS, are less likely to file a claim, which costs carriers a substantial amount of money every year. Scores typically run from 200 to 997. Good scores start at 770 and poor scores are those that fall below 500.
How are Insurance Scores Used?
Once an insurance score has been determined from the data in a credit report, it’s used in conjunction with your insurance claim history to determine things like:
- Whether new insurance applicants should be approved for homeowners insurance in Texas or in other states.
- Good scores, poor scores or excellent scores are all used for determining insurance rates for homeowners insurance in Texas.
- Insurance rates calculated from scores are then applied to premiums, which is obviously important to all consumers.
Credit Information Affecting Your Home Insurance Score
IS are rather complex in nature, and it can be difficult to identify all the factors used to calculate scores. Even so, these examples may help to give you an idea of the types of credit information that could be used when calculating insurance scores.
- Insurers look at the account status of every account to see whether you’re paying on time or are making late payments.
- Any signs of repossessions, foreclosures or collections generally lower your score.
- Past due amounts reflect negatively.
- Maxing out card limits on most of your cards at the same time increases the likelihood of a poor insurance score.
Remember to consider that credit reports are constantly updated as you make payments and open new accounts. Consequently, IS affecting your homeowners insurance in Texas could also change yearly when a new credit report is pulled and your policy is up for renewal.
How Consumers Can Benefit from Insurance Scores
The introduction of insurance scoring has opened up competition within the insurance market, increased the amount of products offered to consumers and lowered costs.
Consumers with good or excellent insurance scores often qualify for much cheaper premiums because carriers feel they are less of a risk to insure.
Do Insurance Credit Checks Affect Credit Reports?
In most situations, a credit check performed by an insurance carrier won’t have a negative affect on credit scores. When insurance companies pull credit reports for the purpose of deciding IS, it’s called a soft check. Soft checks typically don’t affect credit reports or credit scores.
However, if a credit check was initiated by you when applying for an auto or home loan, it is considered to be a hard hit, which affects credit reports.
Improving credit scores is the first step to good insurance scores, which help to reduce premiums for homeowners insurance in Texas.