A credit score is a number assigned to individuals by credit reporting agencies based on their creditworthiness. The two main credit reporting agencies in Canada are Equifax and TransUnion. Credit scores range anywhere from 300 to 900.
Credit scores have many uses – they’re used to determine whether you qualify for a loan, the interest rate you pay when you borrow money and how high your credit limit is. But did you know that credit scores are sometimes used to determine your insurance premiums?
A few years ago, insurance companies started using credit scores to determine an individual’s level of risk. The Cooperators were one of the first insurance companies to implement the change. Although credit scores are traditionally used to determine whether to extend credit, insurance companies believe they’re also a good reflection of an individual’s level of financial responsibility.
Based on your credit score, insurance companies will determine your risk of missing payments. If you have an above average credit score, you’ll be rewarded with lower insurance premiums. If you have a below average credit score, you may have to pay higher insurance premiums.
Insurance companies do not force you to reveal your credit score in order to obtain insurance, but those who refuse will likely have to pay higher premiums. Without providing your credit score upon request, you will be disqualified from receiving any discounts awarded to clients with good credit.
How to Improve Your Credit Score
If you’re looking to better your credit score, here are some tips to improve it. Most of it is common sense, but it doesn’t hurt to be reminded from time to time.