An inside look into your credit score

I did the yearly (or whenever) shopping around for cheaper insurance, and found that I was overpaying for renter’s insurance, so I switched from PEMCO to American Family. I was getting frustrated with PEMCO’s customer service at any rate.

When I got my new insurance policy, it came with a credit notice (which apparently is the law now) stating how my credit impacted my insurance premium. The interesting part is that it itemized some of my personal credit criteria, and told me the optimal values for these criteria (according to Transunion, at least).

Since I’m a nice guy, you can now see how to optimize your credit score without the hassle of changing insurance policies.  I’ll also give you some hints on improving your credit:

  • Your oldest revolving account (i.e. credit card) should be 18 years old! Mine is only 10 years old. It’s important to hold on to your oldest credit card. If your oldest card charges a yearly fee, switch cards now so that you can get a new “oldest” card asap.
  • Your most recent credit application should be over two years ago. Mine was 7 months ago, but well worth the temporary ding to my credit. However, if you plan on getting a loan, do not apply for any credit cards for 2 years prior!
  • This one is the most fascinating: A quarter to a half of your credit accounts should have a balance greater than 50% of their credit limit. Only 15% of my accounts had such a balance, which I consider a good thing.

It’s interesting that you’re penalized for keeping your balances low. I guess the credit agencies want to see that you can leverage your credit but still make your monthly payments.

All this was just a long way of reminding you to shop around for insurance from time to time. My next post will explain how to do that.

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