"Good Credit" benefits

[nomoore]

My credit score jumped 100 points in August after I got a repo GWed. It was the only negative on my reports. Now in January when I went to renew my car insurance my payment decreased by $15 a month. I wonder if the 2 are related. Does anyone else have an experience with their car insurance decreasing when their credit score increases?

What other benefits does a better credit score give you? Here's the benefits I can think of right now:

Better loan interest rates

Credit cards that have better rewards programs and/or higher credit limits

Less "deposits" on things like cell phone service, new utilities hookups, apartment rentals, etc

Better car insurance rates

[Elaeri]

I'd be really interested to know if there is any correlation between the two! It'd just be another incentive for that high score. lol

[nomoore]

Interesting read (from 2003)

http://www.bankrate.com/brm/news/insurance/credit-scores1.asp

And a newer one

http://www.dailyfinance.com/2010/01/29/auto-insurance-premiums-tied-to-credit-score/

[pizzadude]

Your credit is most certainly one of the factors used by insurance companies to assign risk to you, and to derive your payments based on it.

That's interesting that your payments dropped that much ~ how much of a percentage decrease was that ?

[nomoore]

I was paying $123.67 and my payment went down to $109.01. Full coverage on 2 vehicles.

[pizzadude]

That's almost a 12% decrease ~ nice !

[HoldingOntoHope]

Whether credit scores can be used as a factor in setting insurance rates is a state by state issue. In California they can not be used as a factor (by state law). But the insurance companies do not disclose the formula that they use to set individual rates here. In comparison shopping I have found a wide variation in price quotes.

I am currently with USAA on a bundled home / auto / umbrella and they provided the best by far in my case. YMMV.

[Duke-of-Earl]

I started getting notations a couple of years ago on my State Farm auto insurance renewals to the effect that a "consumer credit report" had been used in determining my premium.  In fact, the premium's been going down, but the notation goes on to quote something that looks like one of the infamous "reason codes", saying the "percentage of revolving accounts paid on time is too low".  It's 100%, haven't paid anything late in twenty years, but that's TOO LOW???

What's especially annoying about this is that it's totally opaque.  My agent admits she has no clue as to what the actual effect on my premium is.  She can quote the "insurance score" to me, but neither of us has any standard to compare it against (as also noted by an earlier poster).  I got a referral to the SF underwriting unit, and eventually got to talk with someone who sounded like he knew what he was talking about.  He said I shouldn't worry about the score business, it wasn't raising my premium, but wouldn't quote any specifics.  I asked about the bogus "reason" quote, and he pretty much admitted that "the system" makes those up, and they are only included on the renewal form to satisfy statutory requirements.  Remember when your mom taught you "If you can't think of anything bad to say about someone, just make something up"?

I was tempted to jump ship, and considered USAA pretty seriously.  But the first question I asked the customer service rep was whether they use credit scores to set their premiums.  He said yes, and I said no thanks.

[boomhower]

Insurance companies have been using credit to set rates for quite a while.  "Their" research shows that low credit coorelates with high claim rates.  How much truth is in that I don't have a clue but it's a predominate practice.

[Duke-of-Earl]

They may have been doing it for quite a while, but I think some statutory requirement to disclose it (however unclearly) must only have come along in the last few years.