Thursday, 6 March 2008
Arkansas Homeowners With Good Credit Get Lower Insurance Rates
Arkansas State Senate recently released a report that found over 30 percent of state’s residents had their homeowners and auto insurance rates reduced last year, according to the Arkansas Business Weekly. The reason? Good credit scores.
Insurance companies use credit score as a factor in setting rates because they use it as an indicator of how likely a policyholder is going to pay their bill. The higher the score, the more likely they may be to pay premiums on time.
The state does regulate the practice — requiring insurers to run recent credit checks and prohibits companies from solely using credit scores to determine rates.
From the findings in the report, insurers are rewarding Arkansas policyholders for their good credit behaviors.
But the credit score effect works both ways.
Just over 9 percent of car and homeowners saw their insurance premiums raised because of poor credit.
The Senate report acknowledged that many policyholders with poor credit disagree with using credit score as a rate-setting factor.
“The practice has generated some controversy among consumers, who don’t understand how their credit history can affect whether or not they are safe drivers and whether or not their home is a good or bad risk,“ wrote the report.
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