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credit ratings

How do they affect your premiums?

You wouldn't think it were true, but it is: there's a direct link between good credit and low home and auto insurance premiums. Several studies in Texas and other states have shown that consumers with good credit have fewer insurance claims.

In fact, there's such a strong correlation that many states, Texas included, allow credit as a rating factor. Why? Because the impact of credit can be proven like other factors, including prior claims, driving experience, or the age of a home.

For example, it is more likely for a young driver to have accidents, mostly due to their lack of experience behind the wheel. Even though not every young driver will have an accident, they all pay more for their insurance - and older, more experienced drivers (unless they themselves have horrible driving records) pay less.

While this may seem controversial (if not illogical - some wonder about the connection between driving safety and the ability to pay bills), such practices are wholly within the laws of most states. However, if the insurance company or credit card issuer fails to send the consumer a notice of adverse action under the Fair Credit Reporting Act, there may be a violation of that federal statute.

The FCRA requires a company that uses a credit report to take an adverse action (raising rate/premium amount) to give the consumer written notice, thus giving the consumer a fair opportunity to examine the credit report and dispute any entries.

If you want to talk about your home and auto insurance needs, give us a call at 512-476-6566.