Bad Credit? Insurers Will Make You Pay

By now you know that you need to keep tabs on your credit history to make a good impression on lenders, landlords and employers.  But did you know that your home insurer is also looking?

In most states they're allowed to use your credit information to formulate premiums - and in June the U.S. Supreme Court decided that your carrier doesn't need to tell you if your credit has caused you to pay more.

How insurance premiums are determined is a recipe long kept secret from consumers.  Some 90 percent of homeowner insurance carriers use a score based on credit data as part of that recipe, according to risk-assessment firm Fair Isaac, known for its FICO credit score.

However the scores are tabulated from your insurance company, here are a few tips that should help you get a better rate on your homeowner's insurance the next time your insurer takes a peek at your credit report:

• Pay bills on time: Late payments show up for seven years.
• Keep revolving balances low: Insurance companies look at how much debt you have relative to available credit.
• Keep your oldest credit card: Insurers like folks with well-established lines of credit. Five years is good, 10 ideal.
• Don't apply for lots of credit at once: Your score might drop. (You're not penalized for shopping, however; multiple auto or mortgage inquiries within 45 days are considered as one.)
• Get rid of miscellaneous cards you don't use: Having too many can hurt your score.

No matter who devises your score, the original data comes from credit bureaus.  So check your credit reports for accuracy.

Get a free copy from each of the three bureaus annually at annualcreditreport.com.