Credit Based Insurance Scores

Much like credit scores are use by creditors and lenders to determine your credit risk, insurance credit scores are used by insurance companies to evaluate the risk of potential insurance losses.

Because insurance scores have statistically proven to be a good predictor of future losses, insurance companies use these insurance scores along with many other factors to evaluate new and renewal insurance policies.

Why are they called “Credit-Based Insurance Scores”?
Because like credit risk scores they use the information on your credit report to determine your insurance score. Although insurance scores predict something totally else from risk credit scores, they still do it by using the same information. They just use a totally different formula.
Much like credit risk scores – insurance credit scores change with any change of information on your credit report.

What is the range and formula of insurance scores?
Insurance credit scores are proprietary. Almost every insurance company has its own version, formula and range. The companies do not disclose the formulas, nor are they willing to disclose customers’ scores to them.

What information affects my insurance score?
The same information that affects your credit risk score also affects your insurance score. Only the weights each factor is given are different, as is the formula itself.
Derogatory information like bankruptcy, foreclosures, liens, defaults, collections and late payments are bad for your insurance score, while long and positive payment history, low credit utilization and a good mix of credit types benefit your insurance score.

Similarly, the same factors that DO NOT affect your credit risk score are excluded from your insurance score as well (e.g. your income, race, gender, marital status, religion, age, geographic location, nationality, ethnicity and many more).

How can I improve my insurance credit scores?
As explained above, information regarding credit based insurance scores is proprietary, and the companies won’t disclose any information about it. However, you can make some educated guesses. For starters, the things that improve your credit risk score are likely the same things that improve your credit insurance scores, and vise versa.

Avoiding bankruptcy, late payments, collections, tax debts and late payments will most likely improve your insurance score. In addition, having well-aged credit history, keeping low balance-to-limit credit ratio and minimizing inquiries can help as well. See Tips to Improve Credit Score for more information.