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Higher credit score can lead to better insurance premiums

Credit reports can show mistakes before they damage a credit score.

Consumers hoping to trim their insurance premiums may benefit from improving their credit score.

The Insurance Information Institute suggested ways consumers can protect themselves – when provisions from the Credit Card Accountability, Responsibility and Disclosure Act of 2009 are not enough. This starts with paying bills on time. Payment history accounts for 35 percent of a consumer’s credit score, according to FICO, and may be indicative of a consumer’s responsibility.

“A good credit history can reduce your auto and homeowners insurance premiums since many insurers offer discounts to policyholders with a proven track record of responsible financial behavior,” said Loretta Worters, vice president with the III.

Consumers may also want to limit the number of credit cards they open to three or four. This prevents them from running up too much debt, but also allows them to establish a strong balance-to-credit-limit ratio. Consumers can save money by paying off accounts with high interest rates first.

Requesting a credit report can help consumers spot and take action against any mistakes or fraudulent charges before they affect their credit score.

Studies have shown that individuals who maintain their credit better are also less likely to file insurance claims and be less costly to insurers.

Posted: February 26, 2010

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