Question

1a) True or false? Your credit score can affect your home and auto insurance rates.

1b) According to credit agency Experian, which of these is among the five biggest factors in determining your credit score?

A) Your payment history

B) Credit Utilization

C) late payments

D) All of the above

Answer 1

1a.Credit score is used to understand the creditworthiness of an individual. If the scores are good, he or she is creditworthy and vice versa. It is used by bankers and over the past couple of decades insurers have started using it too. The rates for insurance increase as credit score goes down. Thus, it is true that it has an impact on premium rates.

1b. Credit score is affected by a lot of factors. The 5 most important of them are as under

1. Payment history: whether payment is made on time or not and the frequency of late payments and severity is included in this.

2. Credit utilisation: How much of the credit limit is being utilised by the person and how often shows the credit hunger. If limit of credit is reached often then it shows the person may not be able to handle debt properly.

3. Length of credit history shows the time period since one started using credit.

4. New account: if a lot of applications are made in a short time to obtain credit it can have a negative impact.

5. Types of credit in use: different types of loans also has a small impact.

A) as stated it is one of the factors.

B) as stated it is one of the factors.

C) it comes under payment history and thus has an impact.

D) correct answer.

Thus, a,b,c are not the answer. D is the answer.

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