Why it matters
If you have bad credit, insurance will cost you more and will be more difficult to get because insurers believe there's a connection between a consumer's credit history and the likelihood they will file a claim.

"More than 90 percent of insurance companies evaluate credit because it's been proven to be an excellent predictor of risk," says Jeff Junkas, spokesman for the American Insurance Association, or AIA.

Some insurers, typically for auto and home, consider credit history in determining whether to issue or renew an insurance policy -- and the amount of coverage they'll provide.

Insurers use a consumer's insurance score. This score predicts how often you will file a claim and if it will be expensive. It's based on payment history, bankruptcies, collections, outstanding debts and length of credit history, according to the AIA. The only inquiries that affect the score are the ones the consumer makes.

Insurers get insurance scores from the three major credit bureaus: Equifax, Experian and TransUnion. They also receive scores from Fair Isaac, the leading maker of credit scores, and ChoicePoint, a provider of identification and credential verification services for business and government.

Some insurance companies get your credit report and put it through systems that calculate their own proprietary insurance scores.

However, credit is only one variable added to the overall mix to underwrite or price insurance polices, says Junkas. He says other variables considered include driving record, claims history, location and gender.

What you can do
State and federal laws provide some exceptions for bad credit, says Junkas. Many state laws forbid using the consumer's credit as the sole factor on whether you get insurance. Some states consider extenuating circumstances such as a job loss or a medical situation.

Experts stress checking your credit report so you know what's in it and fixing any errors. Reports can be retrieved for free from the three major credit bureaus.

Consumers with newly discharged bankruptcies especially need to check their credit reports to make certain accounts with debts that were discharged show a zero balance.

Consumers can purchase their home and auto insurance scores from ChoicePoint for $12.95 each. The purchase includes an Equifax credit report. The ChoicePoint score ranges from 200 to 997.  Most people will score between 500 and 900. A high score is indicative of less insurance risk.

An estimated two-thirds of the auto and home insurance carriers who do not have their own score use ChoicePoint's insurance score, says John Wilson, assistant vice president of analytics at ChoicePoint.

The same methods to improve your FICO credit score can be used to enhance your insurance score: Pay bills on time, keep balances low and apply for credit only as needed.

Another tip is to shop around. Junkas says many state insurance departments will list insurers that use credit in making decisions.

Call your state insurance department or insurer to learn if your credit is used. Also, find out how often the insurer looks at credit history, how the insurance score will be factored into the overall application or renewal, and how you can improve your score.