If you want to get the best car insurance rate, you need a good car insurance score. Here’s what that means and how you can raise your score.
What you pay for car insurance depends on several factors. One of them is your car insurance score – or credit-based insurance score, as some call it.
What is a car insurance score? In short, it’s a number that insurance companies calculate to see how likely you are to file a claim. We’ll expand on that in this article. We’ll also cover:
A car insurance score is a three-digit number that’s calculated using your claims history and certain details found in your credit report. It’s used to determine how likely you are to file a claim. As a result, if your score suggests you’re likely to file claims down the road, insurance companies will keep that in mind when they evaluate you.
Companies look at your insurance score when deciding:
These scores matter because they often determine whether you can get a policy, which kind of policy you can get, and how much you’ll pay for insurance.
If you have a bad insurance score, you could face trouble finding a company that will insure you. And if they do insure you, you’ll have to pay high premiums.
Credit scores and car insurance scores are not the same thing. They are similar, though. And companies use some of what they find in your credit report to come up with your car insurance score.
How are credit scores and insurance scores different? They’re mainly different in how they’re used. Financial institutions and other companies look at credit scores to figure out how likely you are to repay a loan or line of credit. Insurers look at insurance scores to figure out how likely you are to file a claim.
An insurance score takes your credit into account. Progressive’s insurance score also accounts for your driving record and claims history. But this varies from insurer to insurer – not all companies include your driving and claims history into your insurance score. Your credit score, on the other hand, is only based on your financial history.
Three companies create the credit-based insurance scores most insurers use: the Fair Isaac Corporation (FICO), LexisNexis, and TransUnion.
Each of these companies consider different aspects of your credit report to come up with their scores.
For example, here’s what FICO looks at while calculating its insurance scores:
In general, these companies calculate your car insurance score by combining your claims history and elements of your credit report.
They don’t all use the same information from your credit report, but many also look at:
Most insurance companies don’t consider your driving history when calculating your insurance score. And they can’t consider any of these personal details during that process either:
These details won’t impact your insurance credit score. But some of them may impact your insurance rate.
You want a high auto insurance score. Anything above 700 is at least “good.” Here are the car insurance score ranges FICO, LexisNexis, and TransUnion use right now:
If you want to see your car insurance score, you’re probably going to have to pay for it.
To see your FICO auto score, you need to pay a monthly fee of about $20. To see your LexisNexis score, you need to pay a one-time fee of around $13.
Your insurance score may be included on the adverse action notification an insurance company sends you, too. In that case, you won’t have to pay anything to see it.
Is your credit score pretty high? And have you rarely, or never, filed a car insurance claim? If you, save your money here. Your insurance score should be pretty high, too.
The main way you can improve your car insurance score is to improve your credit score.
When your credit score goes up, so does your car insurance score.
To get your credit score up, try these tips:
Do all the above and not only will your credit scores and credit-based insurance scores improve, but you should save money on car insurance, too.
California, Hawaii, and Massachusetts currently prohibit insurance companies from using credit-based scores to determine auto policy premiums.
All other states allow insurers to use credit-based scores in this way.
Car insurance companies must notify you if reviewing your credit score causes them to deny you coverage. They also need to notify you if it causes them to charge you a rate that’s higher than what they’d charge someone with an average auto insurance score.
By law, these “adverse action” notices have to list up to four reasons why your credit report prompted the insurer to not sell you a policy or to give you a premium that’s higher than usual.
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