Question
Car insurers are using a scoring model tied to your credit rating to set your insurance premium.
One scoring model will "bite you" for opening one new credit card in the previous 4 months. I imagine opening credit card accounts more frequently will only push your scores lower - and possibly your car insurance higher.
More in the latest issue (Aug 2006) of Consumer Reports Magazine or on www.consumerrreports.org (subscription to article required).
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I've been playing the credit card churn game for a long time, my car insurance has never gone up, my score is ~ 800. FWIW.
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I think it depends on the Insurance company. I got a rude suprise from PEMCO for this very exact reason.
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I think it depends on the Insurance company. I got a rude suprise from PEMCO for this very exact reason.
I think that's what happened to me as well with Travelers. They wanted 20% more when renewing my house insurance this year.
I went with Liberty, almost half the price that Travelers wanted. Definitely worth shopping around (I used insurance.com). I also switched my car insurance and added sinkhole coverage and an umbrella policy.
My wife and I got something like 300K miles the last 6 months churning cards. Well worth it for us. It might not be if we were about to apply for a mortage though.
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I've been playing the credit card churn game for a long time, my car insurance has never gone up, my score is ~ 800. FWIW.
To those who've done churning and are responding here --- could you please mention what car insurance company and home insurance company you have? Thanks.
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I've been playing the credit card churn game for a long time, my car insurance has never gone up, my score is ~ 800. FWIW.
I dont see any rate increase on our car insurance either. Ours is State Farm, been with them over 20 years and moving from one state to another. Because of the long history, the discount they offered cannot be beat by any other insurance company out there. I even got Geico rep told me that there is no way anyone can beat a policy that is held for many years and told me not to bother to shop around. Truth be told, I priced it with Hartford, Liberty or whatever AAA offered, none even come close. The rate got adjusted every now and then based on whole region adjustment, not individual. And I have never seen a credit inquiry from State Farm - that tells me the credit rating has no bearing in our insurance policy.
I guess those who hopped from one insurance company to another would be more affected. In the short run, hopping around may save you some bucks. In the long run, it may not worth it, especially if you have an accident. Years back we had an small accident in Canada and it was our own fault. State Farm made a couple phone calls to verify with us that there was no fraud involved, when the other party in Canada filed a claim. (We also reported the accident to local State Farm agent, and had our car repaired when we got home, about $850 repair after $250 deductible, a lower panel at the left rear was replaced). Our rate was not raised, but we did not get the benefit of lower rates in 3 years when there were rate reduction. Then things resumed to normal.
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I should have mentioned that I have Liberty Mutual home insurance and GEICO car. I see credit checks from Liberty on my report once per year. (Can't comment on churning)
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I have two auto insurance and home renters insurance with AAA. They never checked my score after the first initial inquiry in 2004. Recently I changed one of my vehicles and so asked for changes in my policy. My score has droped from 9 (the best one can get) to 8 and so a sharp increase in rate. Ofcourse I have been in credit card churning business for the last one year. AAA could not verify the reason for drop in score. I have asked choice trust to send me an auto score report to find out if I can.
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Does anyone else find it a little bizarre that applying for a credit card would change your car or home insurance rates? Since it's hard to see a direct causal effect to a person's risk of a claim, I guess this must be "correlation light", meaning the computers tell them that recent credit applicants incur more claims.
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Does anyone else find it a little bizarre that applying for a credit card would change your car or home insurance rates?
Not crazy at all. As SOON as I get a new credit card, I start running red lights and smoking in a bed (I don't smoke). :-)