Credit Health Checks

By Author: Marcus Stalder
Total Articles: 491
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Politicians in Washington only seem interested in arguing about principles. No one wants to get real and start talking either about cuts to budgets, or tax raises to pay for the current raft of things the government provides. No Democrat can suggest cutting an entitlement. No GOPer can suggest raising taxes. The electoral base would rise up in a fury and strike them down. This leaves the country in a mess. Ever since the property bubble burst and the credit crunch arrived, we've been in deep trouble. The national unemployment rate has been hovering around 10% for going on two years with individual states and age groups more seriously affected. Property values continue to fall with personal bankruptcies and foreclosures waiting to catch those whose family budgets cannot keep pace with living expenses. Although the robosigning problem has slowed down repossessions, thousands of properties are being taken over by mortgage holders every day. This makes your own credit score particularly important.

To get the best score, you have to manage your credit well. This does not mean paying down every debt. Ironically, paying off ...
... all your debts means you have no record in managing your debts. You need to keep credit cards and use them responsibly to maintain your score. This requires selective pruning. Pay off all the most expensive, like the store cards. Keep the cards with the lowest interest rates. If you need advice, go to one of the ethical debt counselors. The National Foundation for Credit Counseling runs a website helping you to find the more responsible advisors. Why do this for insurance purposes?

Unfortunately, insurance companies use credit scores in setting premium rates. The statistics show people who have low score make more claims. There are a number of reasons for this. As family budgets come under pressure, routine maintenance and repairs drop down the list of priorities. Older vehicles are more often involved in accidents. There's also a temptation to commit fraud. If a family is short of cash, claiming their vehicle has been stolen is growing more common. Hence, higher rates are charged. It's not very fair, but insurers stay in profit.

Every company has their own formula for calculating your credit score and you have no right to see your scores. But you do have a right to verify the information from which the scores are calculated. Washington produced the Fair Credit Reporting Act (FCRA). The three major companies, Equifax, Experian, and TransUnion must give you a free copy of your credit report once every twelve months. All you have to do is ask. If you find any mistake, you can insist the company corrects the information. If there's a dispute, you have the right to place a commentary next to the information explaining why you think it's wrong.

If you find serious mistakes, say reporting you have unpaid debts, this will be affecting your credit score. When this information has been corrected, ask for a new quote from your current insurer. Most responsible car insurance companies will reduce your premium immediately. The best will refund premiums as overpaid. This may not produce cheap auto insurance, but it will make you feel better.