CREDIT & INSURANCE
—LEARN HOW CREDIT & OTHER FACTORS AFFECT YOUR INSURANCE CHOICES


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Your “credit history” is all the information—such as credit accounts, balances due and details of your payment history—contained in your credit report file:



Mandatory Credit Resources...


In this discussion we will look at factors that affect your credit and credit score, explain what an expanded credit report is, explain how a secured credit card can help you get started on a path to improving your credit to help you get insurance at a good rate, explain why your homeowner's insurance rate could possibly increase if you file a claim, discuss the medical process that you should use if you are going to apply for life insurance, discuss insurable interest and how it could affect youand finally conclude with our final thoughts on credit & insurance. 



Credit Reports



Credit Bureaus (TransUnion, Equifax and Experian) collect information and update it regularly.


Smaller bureaus also collect and update information on you, however the three listed above are the major player’s and the ones you should be particularly concerned with if your goal is to improve your credit.


Your credit report would also contain information about bankruptcies, overdue debt from collection agencies, foreclosures, liens—and judgments if you were in the unfortunate position of being delinquent.


Your credit report would also show if you paid your credit cards, auto loans, mortgages and other revolving and installment debt in a timely manner.


In addition, whenever you apply for a loan or a line of credit, you in essence authorize your lender to inquire for a copy of your credit report. This is how inquiries appear on your credit report.




You Credit Score is a numerical score based on a highly secretive Algorithm:




Insurer’s feel that your credit score affects the filing of claims—the lower your score the more claims you are likely to file according to many insurers. 


Credit Scores:



Credit Scores are now used if you were to "rent an apartment, apply for your dream job, purchase auto insurance, or apply for a mortgage and other loans."


Prior to applying for any of the above you should have a good understanding of your Credit History & Credit Score and know where you stand.


Your “credit score” is a numerical calculation (highly secretive algorithm used) based on the information in your credit report. Your credit score is often known as your FICO score and is used by many lenders to determine your credit worthiness and help them in determining if they will grant you credit.


Your score will go up or down based on positive or negative information on the report, how you use your credit, the age of your accounts, the types of accounts you have open, whether you have hard inquiries on your report—and a number of other factors.



Other Credit Factors:



Expanded Credit Report or file uses your utility payments such as water, gas, electric phone etceteraalong with your rental payment history to give you an extended score.


Some lenders will use this process for certain types of loans—however, the use has been decreasing in recent years.


If you have bad credit and want to improve your credit position prior to applying—or get a better rate with your current insurer—consider a secured credit card of 12 months that can be converted to a regular credit card if your credit is in a position where you are unable to get a regular credit card. Be aware of unreasonable and add-on fees.


In many cases you may have to pay fees such as an annual fee.  If that applies to your situation make sure the fees are reasonable.


Consider a secured card from your credit union or local bank first. You may be able to tie the card to your CD or savings account. Look for a card with no application fee, an annual fee no higher than $50, and the ability to convert to a regular card in 12 to 18 months maximum.



Secured Card companies often report you differently to the credit bureaus—depending on the company.



It is wise if you have a secured card to utilize 10% or less of your credit limit. For example, if your credit limit is $1,500 then your maximum usage should be $150 if your goal is to rebuild and maintain your credit.


It is also wise to pay your bill in full as soon as you get the statement as that could potentially help you when creditors report to the credit bureaus.


For those with fair credit continue making timely payments and pay your debt off as rapidly as you can based on your income. By doing so, you will soon be in position to get a good rate or the best rate on insurance products and other loans.




Once your credit is re-built you can normally obtain an FHA loan for a home purchase with a 620 credit score and a 3.5% downpayment.




For those with excellent credit continue making timely payments—you are in great position now and you want to stay that way.


You can now decide to choose an insurance product and you should get the best rate based on insurance products and other loans that consider your credit score.


It may be wise to see if you can get a better rate (with your current insurer) based on your credit score if your score has risen in the last few years and your rates have not decreased.


If the insurer uses credit in the calculation of your insurance rate you could possibly see your rates reduced.




Over the years I have recommended the following sites to help consumers establish and improve their credit with good results:




Bankrate.com 

Cardrate.com 

CreditCardTuneup.com 

CUNA.org 

Nerdwallet.com 

ehealthinsurance.com

lexingtonlaw.com


Remember, your goal should never be to max out the credit card—but to use the card at a level where you can pay the balance in full each month.


If you spend to your maximum limit your credit score will go down and you will be put yourself in a deeper financial hole.


Paying your credit card debt in full monthly and paying in a timely manner "cannot be overstated" as doing so will play a big role in establishing and improving your credit and credit score. 


Other Insurance Factors:



Homeowner's Insurance:


If you have an electric surge and 4 of your appliances go bad and you file a claim with your insurer you could possibly see your annual homeowners insurance rate go up 20% to 30% with many insurers.


If your claim is anything other than weather related, look for your premium to increase.


If you live in the State of Georgia you can normally find competitive homeowner insurance rates as hurricanes and other severe weather has not disproportionately affected the State in recent years for the most part.


There are over 250 insurers operating in the State of Georgia which tends to keep the premiums at a competitive rate.


Having said that, if you file a non-weather related claim, you will go into the insurance industry database and all companies will or should be aware that you filed a claim—assuming the insurance company did their due diligence and are a member of the database company which they normally are.


You can go to any number of sites to obtain homeowners insuranceincluding the major players such as Allstate, State Farm and others.



Life Insurance:



Medical Information Bureau (MIB)—not "The Men In Black" is a bureau whose purpose is to supply underwriting information in life insurance to member companies, which report any health impairments of an applicant for insurance.


It is imperative that you get a complete physical and medical evaluation prior to applying for life insurance if your goal is to get the best rate and you don't want to be in the medical database with negative information which can lead to higher premiums and other negative options.


By doing so, you put yourself in position to correct your ailment(s) prior to applying for life insurance—if you have hypertension, high blood pressure, high cholesterol etcetera—you would be in position to correct the ailment and go back to your doctor and get your ailment(s) in normal ranges prior to applying for life insurance.




In Property & Life Insurance You Must Have An "Insurable Interest" In Most Cases:




Insurable interest—the insured (you) must be in a position to lose financially if a loss occurs, or incur some other kind of harm if loss takes place, also insurable interest must be met at inception of policy for life insurance and for—property insurance—at the time of loss.


When “you” purchase life insurance you can name whoever you choose as beneficiary without regard to insurable interest. If you wish to purchase life insurance on another you must have an insurable interest in that person’s life.


If there is a pecuniary interest such as salesperson and corporation—corporation or business partner’s can purchase life insurance on salesperson or one another. The insurable interest requirement in life insurance can be met if there is a pecuniary interest--which is an exception to the general rule.




Final Thoughts On Credit & Insurance




For those who have excellent credit selecting appropriate insurance products where you will obtain a good rate should be within your grasps.


For others, improving your credit to a higher level will not only get you good insurance rates but should be a major goal of yours as it has the potential to propel you and your family to meet your other financial goals.


Having solid credit and a properly funded emergency fund is at the foundation of improving your credit and financial life. 


By understanding and applying the above information to your unique financial situation you put yourself in a position to change the dynamics of your situation.


Always strive to maintain and improve your credit whether it be for insurance purposes or reaching any of your financial goals.


You can go to ehealthinsurance.com and dentalplans.com to get an overview of ratesand size up the competion in the health and dental insurance marketplace.



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