What Every Consumer Should Know about Credit
Good credit will help a person in more ways than most people assume. Having a favorable credit history is the key to finding a dream job, getting better insurance rates and finding car or home loans with lower interest rates. Renters living in areas with hot housing markets have a much easier time finding the right place with a good credit rating. In many cases, they are able to view the best properties first.

Insurance typically only accounts for between five and seven percent of a home payment, but it is important to save as much as possible when buying a home. Policyholders with good credit normally receive a discount from their insurers.

Understanding The Difference Between Insurance Scores and Credit Scores
While insurance scores predict insurance losses, credit scores predict delinquency. Both types of scores are determined by calculating information found in a credit report. Items such as credit history length, outstanding debt, new credit applications, bankruptcies, debt repayment timelines and the number of credit accounts open are used to calculate a credit score. Insurance companies place a different amount of importance on each factor, and their amount of importance is not equal to the percentages assigned by credit bureaus.

When insurance scores are calculated, factors such as gender, ethnic group, religion, disability, marital status, address and nationality are not taken into consideration. These scores are not used to measure the amount of money people make but how they manage what money they have or the credit available to them. Experts say that how a person manages financial affairs is a good way to predict insurance claims. Statistics show that people who have low insurance scores are more likely to file claims. Most people have good or decent credit, so that means they will usually pay less for insurance coverage than they would if there were no such thing as insurance scores.

Building and Maintaining Good Credit
Always pay every bill on time. By making a habit of this, it is easy to build a solid credit score. Over time, a long history of paying bills on time will look good. Limit the number of credit cards used to about three or four. Using them responsibly is good, but having too many can be a detriment. Always keep the balances on the cards low, and avoid using more than 30 percent of the available credit. Every year, check a personal credit report. Each person is entitled to check his or her credit once per year for free. Any of the three agencies will provide them.

The Fair Credit Reporting Act makes the three reporting agencies provide consumers with reports every 12 months if they are requested. However, they do not just send them automatically without an online, phone or written request. Consumers who need extensive information about this topic should visit the Federal Trade Commission's site or discuss concerns with an agent.

When it is not possible to meet financial obligations, contact creditors to discuss a more affordable payment arrangement. Most creditors have programs or payment options that are designed to work for nearly any situation. They are not as likely to report the debt negatively to credit bureaus when consumers make an effort to honor the debt.

Credit does matter when it comes to auto, home, and business insurance, so make sure to take the proper measures to protect your personal and business credit.

Since nearly half of all marriages fail, divorce is unfortunately very real for many people. Couples face the difficult task of separating emotionally and financially. This has insurance implications as well. Legal and financial advice will be critical, particularly if there are children involved. Divorce can have a serious impact on one’s credit standing, both in terms of dividing joint debt that exists at the time of divorce and expenses that come with starting over. Paying close attention to existing obligations and monitoring credit reports at this time is critically important. 

AUTO
A divorced couple will need to decide who gets which car. A change in car ownership will mean a change in insurance. Let your insurance company know about a change of address; who will now be driving the car; and any change in the type or amount of driving that will be done. These details will have an effect on your insurance premium. If someone needs to buy a new car, new insurance will need to be arranged before the car is registered. Removing a former spouse from the insurance policy also protects you from possible liability if they are involved in an accident and get sued.

HOME
Divorce will mean a change of address for one or both parties. The insurer needs to know when there is a change in residence and property coverage. For example, if one party leaves and receives the jewelry in the divorce settlement, the insurer will need to know whether to cancel any special coverage for expensive jewelry. Likewise, if security modifications are made to the home, because one party is now living alone, tell the insurance company. Those security upgrades may qualify for a discounted rate. If moving from a owner occupied home to a rental property, consider getting renter’s insurance to cover personal possessions and liability.

LIFE
Many married couples buy life insurance to cover existing and anticipated debts and financial obligations. When a couple divorces, these obligations generally still exist and life insurance should be considered as part of the final divorce decree. Married couples generally list each other as the beneficiary on life insurance policies. Carefully consider any changes. There may be good reasons to continue to keep life insurance on a former spouse. If the spouse who is providing alimony and child support dies, this may mean a loss of income. Some divorced couples may also consider keeping (or purchasing) life insurance on the spouse who has the primary responsibility for raising the children. If he or she dies, costly childcare will need to be arranged. The divorce decree should include the funds to pay for this life insurance policy. This way, the spouse receiving alimony can make sure the premiums are paid and he or she is financially protected with life insurance. If a divorced couple is purchasing life insurance to provide financial protection for the children and money is tight, they may want to consider purchasing term coverage rather than whole life. Term is generally cheaper and it is designed to provide protection for a specific period of time – for example, until the children reach the age of 21.

HEALTH
Unless both spouses each have their own health insurance and there are no children, health insurance should be clearly agreed upon in the divorce decree. Federal law states that spouses and their dependent children who are currently insured by a health plan are eligible for Consolidated Omnibus Budget Reconciliation or COBRA coverage for 18 months. The divorce decree should state how this is going to be paid for and a plan should be legally agreed upon to make health insurance available after that time.

DISABILITY
A disability can threaten financial support that a former spouse and children depend upon. Disability insurance should be addressed in the divorce decree. Careful attention should be paid to how disability insurance should be funded. As with a life insurance policy, the former spouse receiving financial support should own the policy and pay the premiums to make sure that the policy remains in force and that the beneficiaries are not changed. The funds for this insurance should be represented in the amount of financial support the spouse and children receive.

LONG-TERM CARE
Long-term care insurance covers the cost of assistance to those who are unable to perform the normal daily activities that healthy, fully functional people are usually able to do on a daily basis. The need for long-term care services arises from chronic health conditions or physical disabilities such as multiple sclerosis, Parkinson’s or Alzheimer’s disease. Couples going through a divorce need to make sure that they take into account both the need to care for aging parents and dependent siblings as well as the cost of this insurance when assessing needs and allocating assets.

FINANCIAL PLANNING
There are two key things that divorcing couples should do prior to meeting with their insurance or financial advisor:

1. List assets and liabilities: This should include real estate and personal property; checking, savings and investment accounts; retirement and pension plans; and life insurance. On the liability side, there are the mortgage, car and school loans; and home equity and credit card balances.
2. Develop a budget: Income will be stretched to the limit because there are going to be two households instead of one. The budget should include normal living and household expenses; anticipated educational and business expenses; tax obligations; car and home mortgage payments; medical and dental costs; childcare and insurance premiums. There needs to be a firm understanding as to what is required of each spouse.

A trust may be appropriate to meet the educational needs of any children. This may include a written agreement regarding future contributions to this account to properly prepare for the increasing costs of tuition.

Divorced couples also need to look into the cash flow and tax implications for splitting assets. At first glance, a $100,000 savings account and a $100,000 traditional IRA may appear to have the same value. However, a spouse with custody of the children might have more everyday expenses and need greater access to cash than the non-custodial spouse. Generally, the IRA can’t be tapped until age 59 ½ without penalty. In the meantime, unlike a savings or investment account, proceeds are tax deferred. The vested portion of existing retirement plans should also be considered.

Military spouses who divorce should be aware of the Uniformed Services Former Spouse Protection Act, which recognizes the contributions that former spouses made to support the service member’s career and entitles the former spouse to a portion of the retirement pay. More information can be accessed at www.dfas.mil.

Divorce can be a tough situation go through. Make sure your insurance matters are addressed properly to prevent any problems in the future.