What is an Insurance Score and What Can I do to Effect it

Your insurance score is simply a rating that is generated from information off your credit report. Why does a credit report matter when you’re buying auto insurance? It is considered a good indicator of the type of driver you will be. It helps tell the insurance company if you will be prone to accidents or make a lot of insurance claims. This allows insurance companies to compute more accurate rates. Each insurance company has a different way of using this information, but in general, the better your credit report, the better your rates.

Determining an Insurance Score

In many cases, the three biggest factors affecting your insurance score are your accident and insurance claim history and your credit report. Values are assigned to each predictive factor, and the values are then added together to determine your insurance score. The lower your score, the lower your risk.

Though insurance scores use information from your credit report, they do not look at income or job history when making rate decisions. An insurance score is not a credit score. Credit scores are used to tell people how likely you are to repay the amounts you have borrowed. Insurance scores tell a company how great a risk you may be to file a claim. Regardless of your score, whether high or low, an insurance company will not deny you auto insurance. If it’s high, you’ll end up with higher rates, but you won’t be turned away.

Factors that Impact Insurance Score

So, what types of factors affect your insurance score?

Favorable Factors

  • Long-established credit history
  • Low use of available credit
  • Open accounts in good standing
  • No late payments
  • No past-due accounts

Unfavorable Factors

  • Short credit history
  • Collection accounts
  • High use of available credit
  • Past-due payments
  • Numerous recent applications for credit

Can I Change My Insurance Score?

You can lower your insurance score by keeping your credit report in good standing. Pay mortgage and loan payments on time, keep credit accounts up to date and avoid taking out numerous credit applications in a short period of time. Also keep a fair amount of available credit open. By doing this, you’re not only lowering your insurance score but you’ll also be saving money by getting more competitive rates. Your insurance professional will be happy to review your current policy. Talk to your agent today.