Your Insurance Risk Score

We all know about credit scores. That little number can affect how much we pay for things like mortgages and car loans. However, there is another important score closely related to a credit score that also affects our bottom line - the insurance risk score.

An insurance risk score is compiled of a variety of data such as credit score, insurance claims history and other specific data related to the type of insurance you are purchasing. Insurance risk scores are used in different ways. Some companies use them to decide on whether or not to sell you a policy. Some insurance companies also use these scored to determine how much you'll pay for the policy.

Insurance risk scores may include information like crime statistics for your area and characteristics of your home if you are purchasing home insurance. The biggest factor influencing your score is your credit. FICO's Director of Product Management says that "there is a correlation between how a customer handles their credit and how likely they are to submit an insurance claim." Most studies show that credit history is an accurate predictor of your risk to an insurance company. Keep your credit in good shape to avoid paying higher rates for insurance.