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How your credit score affects the rates you pay for 4 major types of insurance

Male holding credit score card © iStock

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Why would an insurance company want to know your credit score before offering you a policy?

Put yourself in their executives’ wingtips or heels. If you were essentially investing in somebody else’s auto, home, health or life risk, wouldn’t you want to know a little more about them?

“The insurer is looking to price the policy to reflect their risk,” says Michael Barry, spokesman for the Insurance Information Institute, a New York-based trade group. “They’ve found that people who manage their finances well also manage other important aspects of their lives responsibly.”

You can keep an eye on your credit score for free at myBankrate.

Susan Wright, a St. Louis-based insurance expert and author, says insurers pull only certain aspects from your FICO credit score — including your payment history and total debt — to create what’s called your insurance score.

Auto and home insurers use this to weigh the likelihood that you’ll file a claim, miss a payment or attempt insurance fraud. Life and health insurers tend to focus primarily on payment history and the impact of your finances on your overall well-being.

Here’s how your credit score could affect your auto, home, health and life insurance rates.