All admitted carriers selling insurance in New Hampshire, must file its rates to the NH Insurance Department for review. Nearly every carrier has proven to the state that the information found in a credit report can indicate which consumers are likely to file an insurance claim and therefore allowed to be considered when determining the premium.
Insurers are allowed to use credit history to both underwrite and rate a home or auto insurance policy.
Insurance companies are granted permission by the federal and state Fair Credit Reporting Acts (FCRA) for underwriting reasons.
Most insurance companies use credit information to determine "an insurance score" which is not the same thing as your credit score. Carriers use different factors within your credit score and weigh them differently to determine an insurance score. Some of the factors considered may include:
Length of Credit History: A longer history provides more information, which can improve an insurance score.
Public Records: If there is a public record of a bankruptcy, foreclosure, collection notice, etc. it can negatively affect an insurance credit score.
Payment History: The frequency of late payments and days between due date and date payment received can impact an insurance credit score.
Inquiries for Credit: The number of times one applies for new credit including a mortgage, utility account and credit cards can impact an insurance credit score.
Outstanding Debt: How much owed vs. how much credit is available can impact an insurance credit score.
Unfortunately, unlike a credit score, there is not a single number or range that will indicate a good score or not. Insurers use different calculations based on the various factors.
No, the agent or company representative may not even know what your score is, and definitely won't know the factors that went into its calculation. All the agent will know is that your score qualified you for a particular rate or discount.
The Fair Credit Reporting Act requires that carriers tell you if "adverse action" was taken because of your credit information. "Adverse action" can include:
If the insurance company takes adverse action due to credit history, it is required to tell you the name of the national credit bureau that provided the information. Keep in mind however, that in our experience as agents, nearly everyone gets an adverse action notice, because if not getting the absolute best rate, a notice is required by law. It does not mean that there is something wrong with your credit and you should necessarily panic.
That said, you are entitled to a free copy of the credit report used to supply the credit information, so it is suggested that you review this for accuracy if you receive an adverse action notice.
For information on what to do if incorrect information on credit report, please see the NH Insurance Department website.
Improving a credit score takes time and there are no quick fixes. If you make a plan and budget you can stick to, you are more likely to improve your insurance score over time.
NH car insurance premium is calculated using factors like driving history, type of vehicle and age of drivers. NH homeowner's insurance premium can be calculated using factors like the cost to rebuild the home, its location, claim history and age.
HPM Insurance is an independent agency, which means we have access to many insurance companies and not just one. With more than a dozen insurance companies available, all the home and auto companies we represent factor credit rating into premium calculations. This was not the case even 5 years ago, but as the few companies who did not use credit as a factor got hit with larger and more frequent claims, these companies adopted the practice as well.
Because the statistical data has justified its use in the eyes of the NH Insurance Department, it is here to stay for the foreseeable future. It is important to understand how it works so you can take advantage of the possible discounts it can provide.