What to Do When You're Denied Coverage

An insurance carrier may deny your application for car insurance because of your credit score.

If an insurance carrier denies your application for either a homeowner's insurance policy or a car insurance policy, federal law requires the carrier to inform you of the specific reasons your application was denied as long as you request the information within 60 days of the company’s rejection of your application. If an insurance carrier cites information included in your credit report as the reason for its denial of your insurance application, there are steps you can take to increase the likelihood of a carrier agreeing to insure your home or car in the future.

Instructions

Improving Your Credit Score

1. Ask the carrier that denied your application for insurance to give you the name, address and phone number of the credit reporting agency that provided the insurance company with your credit report. Contact the credit reporting agency and request to know what information was included in the report sent to the insurer. A credit reporting agency must provide you with the requested information at no charge if you ask for it within 60 days of an insurance carrier denying your application.

2. Visit annualcreditreport.com or call [phone] to request a copy of your credit report from each of the three national credit reporting companies. Federal law enables you to obtain a copy of your credit report from each of the three agencies for free once per year. The agencies have set up one website and hotline from which you can order the free reports.

3. Purchase your credit score from the credit reporting agencies. The law allows them to charge a fee for sharing your score with you, usually about $8. An agency will typically send information regarding ways to improve your overall score along with your score.

4. Examine your credit report for errors negatively impacting your credit score. Send corrective notices to the appropriate reporting agency if you find mistakes in your credit report.

5. Identify the reasons why your credit score is low enough to prevent you from securing homeowner's insurance or a car insurance policy. Separate the reasons in accordance with how each affects one of the five factors used to determine your credit score: payment history, amounts owed, length of credit history, new credit accounts and credit type.

6. Focus on fixing the habits that impact the two factors most heavily weighted in the determination of your credit score — your payment history and the amount of money you owe creditors — before addressing issues negatively affecting the other factors. If you pay your bills after their respective due dates, create a calendar to remind you to send your payments earlier each month. If your credit account balances are near their limits, work diligently to lower them and keep them at minimal amounts.

7. Develop a plan to resolve issues that lower your credit score by lowering the other three factors used to calculate your credit score. If you have a short credit history, do not establish too many credit accounts at once, for instance. If you pursue a new loan, conduct your search for the best rate within a condensed period of time. Reestablish your credit history by making payments on your new credit account on time.

8. Be patient. Increasing your credit score takes time and concerted, consistent effort.

References

• My FICO: How to Repair Your Credit and Improve Your FICO Credit Score
• Federal Trade Commission; Need Credit or Insurance...; May 2010
• My FICO: What's In Your FICO Score?
• Insure.com; How Your Credit History Affects Your Home and Car Insurance Rates; April 2010
• Insurance Information Institute; How Does My Credit History Affect My Life?
• Federal Trade Commission; How to Dispute Credit Report Errors; August 2011