Good credit will help a person in more ways than most people assume. Having a favorable credit history is the key to finding a dream job, getting better insurance rates and finding car or home loans with lower interest rates. Renters living in areas with hot housing markets have a much easier time finding the right place with a good credit rating. In many cases, they are able to view the best properties first.
Insurance typically only accounts for between five and seven percent of a home payment, but it is important to save as much as possible when buying a home. Policyholders with good credit normally receive a discount from their insurers.
Understanding The Difference Between Insurance Scores and Credit Scores
While insurance scores predict insurance losses, credit scores predict delinquency. Both types of scores are determined by calculating information found in a credit report. Items such as credit history length, outstanding debt, new credit applications, bankruptcies, debt repayment timelines and the number of credit accounts open are used to calculate a credit score. Insurance companies place a different amount of importance on each factor, and their amount of importance is not equal to the percentages assigned by credit bureaus.
When insurance scores are calculated, factors such as gender, ethnic group, religion, disability, marital status, address and nationality are not taken into consideration. These scores are not used to measure the amount of money people make but how they manage what money they have or the credit available to them. Experts say that how a person manages financial affairs is a good way to predict insurance claims. Statistics show that people who have low insurance scores are more likely to file claims. Most people have good or decent credit, so that means they will usually pay less for insurance coverage than they would if there were no such thing as insurance scores.
Building and Maintaining Good Credit
Always pay every bill on time. By making a habit of this, it is easy to build a solid credit score. Over time, a long history of paying bills on time will look good. Limit the number of credit cards used to about three or four. Using them responsibly is good, but having too many can be a detriment. Always keep the balances on the cards low, and avoid using more than 30 percent of the available credit. Every year, check a personal credit report. Each person is entitled to check his or her credit once per year for free. Any of the three agencies will provide them.
The Fair Credit Reporting Act makes the three reporting agencies provide consumers with reports every 12 months if they are requested. However, they do not just send them automatically without an online, phone or written request. Consumers who need extensive information about this topic should visit the Federal Trade Commission’s site or discuss concerns with an agent.
When it is not possible to meet financial obligations, contact creditors to discuss a more affordable payment arrangement. Most creditors have programs or payment options that are designed to work for nearly any situation. They are not as likely to report the debt negatively to credit bureaus when consumers make an effort to honor the debt.