An auto insurance score is a number insurance companies look at to see how likely you are to file a claim.
Companies also look at auto insurance scores, which some call credit-based insurance scores, to determine if they should sell you a policy and how much they should charge you for it.
You’ll learn all about insurance scores in this article, which covers:
- Are credit scores and auto insurance scores the same thing?
- What is a good auto insurance score?
- What is my insurance score?
- How can I improve my auto insurance score?
What is a car insurance score?
An auto insurance score, also known as an auto insurance credit score, is a numerical point system used by car insurance companies to estimate risk. It's a type of credit score that helps insurers determine how likely you are to file a claim.
This score is based on your credit history information, which may include factors such as:
- Payment history: If you regularly pay your bills on time, insurers see you as less of a risk.
- Outstanding debt: If you have a lot of debt, insurers may view you as a higher risk.
- Credit history length: Insurers often view longer credit histories as less risky.
- Credit mix: This refers to the various types of credit you have, such as credit cards, mortgages and auto loans.
- New credit: If you've recently applied for a lot of new credit, insurers may view you as a higher risk.
Insurers use your auto insurance score along with other factors like your driving record, age, location and the type of car you drive to determine your car insurance rates. This is because research has shown a correlation between credit behavior and claim frequency. A lower auto insurance score can lead to higher premiums, while a higher score can help you get lower premiums.
The use of credit information in determining insurance premiums is regulated by state laws, and is prohibited in some states. These five states currently prohibit insurers from using credit-based insurance scores to set rates or make certain other decisions regarding auto coverage:
- California.
- Hawaii.
- Massachusetts.
- Michigan.
- Washington.
Are credit scores and auto insurance scores the same thing?
Auto insurance scores and credit scores are not the same thing, but they are similar. Both scores are based on information in your credit report, but they use different factors to calculate your risk.
- Auto insurance scores are used by insurance companies to determine your risk of filing a claim. They consider factors such as your driving record, your age, the type of car you drive and your credit score.
- Credit scores are used by lenders to determine your risk of defaulting on a loan. They consider factors such as your payment history, your debt-to-income ratio and the length of your credit history.
Insurance companies use your credit score as one factor in calculating your auto insurance score. However, they also consider other factors, such as your driving record and the type of car you drive. Therefore, having a good credit score does not guarantee that you will get a good auto insurance score.
Here are some of the factors that insurance companies consider when calculating your auto insurance score:
- Your driving record: Insurance companies look at your driving history to see if you have any accidents or traffic violations. Drivers with a clean driving record are typically considered to be lower risk and will have lower insurance rates.
- Your age: Insurance companies usually charge higher rates for younger drivers, as they are more likely to be involved in accidents.
- The type of car you drive: Insurance companies often charge higher rates for sports cars and luxury cars, as these cars are more expensive to repair.
- Your credit score: Insurance companies may use your credit score as one factor in calculating your auto insurance score. However, they also consider other factors, such as your driving record and the type of car you drive.
Here’s more about how auto insurance scores and credit scores are different:
| Score type | How it’s calculated | What it’s used for |
|---|---|---|
| Auto insurance score |
| To determine how likely you are to file a claim. |
| Credit score |
| To determine how likely you are to repay a loan or line of credit. |
What is an auto insurance score based on?
In general, your auto insurance score is based on your accident history, your claims history and information pulled from your credit report.
Some of the information from your credit report that can impact your insurance score includes your:
- Length of credit history.
- Payment history.
- Use of available credit.
Each insurer uses a slightly different formula to calculate your auto insurance score, much like how the various credit bureaus use slightly different formulas to calculate your credit score.
While Progressive looks at your accident history, claims history and certain parts of your credit report to come up with your insurance score, for example, other companies might weigh them differently. Or they may look at other aspects of your insurance history as well, like late or missed payments, or lapses in coverage.
What is a good insurance score?
In most cases, a good auto insurance score is a high auto insurance score. Specifically, most companies consider a good insurance score to be 770 or higher.
Auto insurance scores can be as high as 997 and as low as 200. Drivers with higher insurance scores tend to file fewer claims, and in turn they usually pay lower rates for car insurance. The opposite is often true, too — drivers with lower insurance scores tend to file more claims and pay higher car insurance rates.
Does this mean you’ll always pay lower rates for auto insurance if you have a good insurance score? Not necessarily. Along with your insurance score, companies consider several rate factors while calculating your premium. Some of the most common of these factors are your:
- Age.
- Gender.
- Location.
- Marital status.
- Vehicle make and model.
What is my auto insurance score?
If you want to check your auto insurance score, you’ll probably have to pay for it.
To see your LexisNexis auto insurance score, you need to pay a one-time fee of around $13. To see your FICO auto score, you need to pay a monthly fee of about $20.
Your insurance score also may be included in an adverse action notice from an insurance company. You may receive an adverse action notice if an insurer denies you coverage, raises your rates or cancels your policy. In that case, you won’t have to pay to see your insurance score.
Is your credit score high? And have you rarely or never filed a car insurance claim? If so, save your money. Your auto insurance score should be high, too.
How to improve your insurance score
The best way to improve your auto insurance score is to improve your credit score. When your credit score goes up, your insurance score often goes up, too.
To improve your credit score, and thus your insurance score, try these tips:
- Pay down any debt you have as quickly as possible.
- Make loan payments on time.
- Don’t open or apply for new lines of credit until your score is where you want it to be.
Do all of the above and not only should your credit score and auto insurance score improve, but you should save money on car insurance, too.
References:
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