A Credit score is the 3-digit summary of your creditworthiness. A Credit score shows responsibility in managing debt. A credit report is the detailed breakdown of your credit history prepared by the credit bureau like CIBIL or Experian.
The credit score ranges from 300 to 900. The insurance companies consider repayment history and timely payment of EMIs, late payments and so on, to determine policy premium.
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Surveys have proved that car insurance companies consider the credit score as an important aspect to determine premium rates. A low credit score results in higher insurance premium and a high credit score results in a lower insurance premium. Different insurance companies have different methods of interpreting the credit scores.
These companies do not consider factors like income, personal information or job history for calculating the premiums. However, reports prove that people with better credit scores pay less insurance premium and people with low credit scores pay higher insurance premiums on their car insurance plans.
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Insurance companies check credit scores to understand the trends followed in managing and paying off debt. With this, insurers are able to assess the likelihood of a claim being filed. The credit history of a person shows how responsible a person is while managing debt and whether or not he/she will pay insurance premiums in time. Credit score is an important factor as the insurer will have to bear more liability if a person has a bad credit score.
You must keep one thing in mind that car insurers do not use your actual credit score, while determining premiums. They have their own methods of calculation to create their own scores. These companies include information from your credit report along with other information to ensure the lender has the ability to pay insurance premiums on time. It also enables an insurance company understand the probability of a claim being filed.
The Credit score reflects the history of repayments towards loans/credit cards, made over a period of time. So, it is inevitable that a credit score is built over time and there are no short-cuts to fixing it. A credit score also reflects the creditworthiness of a person. Building a good credit score takes time and depends on how you manage your debts and loans. Listed below are some useful tips that can help you enjoy a good credit score:
SEE ALSO: IDV for Car Insurance in India
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