Do Insurance Companies Really Check Your Credit Score?

By Anik Singal

With technology booming, the internet and how easy it is for companies to network into databases such as the "credit reporting" databases, more and more companies are able to find out more information about you quicker. This is also helping them get a more accurate view of you.

Insurance companies are no different; they are now reviewing your credit scores as a way to determine how "trustworthy" and "responsible" you really are. For years now, they have been giving "good student" discounts to students. They assume that good grades reflect on the level of responsibility of the student.

Why would it be any different with adults and their credit scores? Research has firmly proven that those with poor credit reports are less responsible across the board and more likely to be a risk to insurance companies.

However, many critics are still arguing that the two have nothing to do with one another and that the practice is completely illegal.

You can basically think about it as that you are now also getting an "insurance credit score" that takes your financial credit score, your accident history, your age, your demographics and other matters into account and then assigns you with a number. They key factor here is that now your financial position is going to begin impacting the quotes that insurance companies give you or whether they accept you at all or not.

The defense of an insurance company?

Studies have clearly shown that most of those who do poorly in credit scores are the most likely to have to make an insurance claim. In other words, how someone is handling their financial affairs can reflect their habits in other areas of their life as well.

However, the major critics of this are arguing that this system is skewed to work against low income households. The argument is that these people are not necessarily "less responsible" but just less capable due to lower incomes. However, whether this should reflect on their level of personal responsibility with is being argued as unethical and maybe even illegal.

For now insurance companies are still checking, but perhaps this will one day not be allowed?

One of the best ways to help improve your credit score is to use a low interest debt consolidation loan to help you close your multiple debt accounts.

This will help you organize your debt and increase your credit score hence helping you improve your chances for good insurance quotes.