All You Need to Know About Your Auto Insurance Score (2023)
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What Is an Auto Insurance Score?
Put simply, this is a number—usually ranging between 300 and 900—that predicts the likelihood of whether or not you’ll end up making an insurance claim. The lower it is, the stronger the possibility you’ll file a claim. Even though it does partially rely on your credit score, the two scores are not the same. Most insurers and consulting companies take these factors into consideration when determining your car insurance score:
- Your overall profile, as well as your driving and claims record
- Your credit rating
This score is not an officially recognized insurance metric, and each company has its method of calculating it. Nevertheless, it is directly linked to your premium. The higher you score, the less you’ll pay. Keep in mind that when certain insurers also use the term “credit-based auto insurance score,” your score is based entirely on your credit rating.
Insurance vs. Credit Scores: What’s the Difference?
A credit score is a number that represents your ability to repay the money you have borrowed. It’s based on your annual income, previous late payments, job history, and other items. According to the NAIC’s recent research, and based on FICO’s data, approximately 95% of auto insurance companies use your credit score when calculating premiums. For instance, major insurers, such as Progressive and Nationwide, openly admit on their websites that they rely on credit scores when determining rates. Most often, instead of looking at your credit report, an insurer will acquire the information from reputable credit repositories such as TransUnion, Equifax, and Experian.
Insurance companies employ this practice because there is a strong statistical correlation between a low credit score and the chances of you filing a claim. However, while your car insurance score relies on your credit rating, there are more factors in this equation. Specifically, insurance companies use additional data—like your age, driving experience, the model of your car, etc.—to finalize your quote.
Keep in mind, there’s no official method for every company to use while calculating their premiums. It’s also worth noting that basing rates on one’s credit score is prohibited in Massachusetts, Hawaii, and California.
What Is a Good Auto Insurance Score?
This will depend on the analytics company that does the actual scoring. Nonetheless, it’s safe to say that anything above 750 will get you an affordable car insurance rate.
The score that the Fair Isaac Corporation (FICO) assigns ranges from 300 to 900. However, keep in mind that every insurer interprets an insurance score scale differently, and these scores are not official. Still, there’s a significant chance that if your score is high, you’ll be able to buy cheap car insurance. The results above 700 are always considered good, while any rating higher than 800 is excellent.
If ChoicePoint compiled the rating, the score would range from 300 to 997. The good ratings usually start at 750, while anything above 800 indicates you’ll get low premiums.
Finally, there’s a TransUnion insurance score in addition to these. This one is based on your credit rating, and it goes from 200 to 997, with anything over 770 representing very good results. You can get it for free on CreditKarma’s website.
How to Improve Your Insurance Score Level
Since your insurance rating is based on two parameters—your credit score and your driving profile—improving each requires a different approach.
Your credit rating can be improved by doing the following:
- Avoid opening new credit card accounts.
- Dispute any errors in your credit report.
- Do not make new purchases using credit card loans.
- Pay off any past debt.
Additionally, if you want to belong to the best car insurance rating tiers, you should try to accomplish the following:
- Get additional driving training.
- Choose a safe, inexpensive, and reliable car model.
- Try to avoid getting any driving violations.
- Consider moving to a less expensive zip-code.
- Drive less often, or at least avoid traffic jams.
Why Does My Auto Insurance Score Matter?
Every insurer has a unique strategy and will assess specific parameters differently. But in the end, if there’s strong evidence that certain factors might raise the chances of you making a claim, every company will take notice. Otherwise, having a high claims expense to a low premium ratio would put them out of business. That’s why insurance scores are a firm indicator of what premiums you’re likely to pay.
In addition to getting your score estimates, getting quotes from multiple insurers is the most direct way to figure out your premium. Each company has a different market approach, meaning prices can vary substantially. Besides getting as many quotes as possible, it’s also smart to check auto insurance reviews. By reading them, you’ll see how each insurer scores in crucial departments such as financial strength and customer service.
What Factors Can Affect an Insurance Score?
Underwriting is mostly based on drawing conclusions from statistical data on previous losses. This means that insurance companies compile and update a list of factors that determine whether or not an applicant will be a high-risk driver. They then check your profile to see where you fit when you apply for coverage.
As far as your credit rating is concerned, the following items may affect insurance scoring when you get a quote:
- Payment history, especially if there are late payments and delinquencies
- Outstanding debt—i.e., how much debt you have at the moment
- The length of your credit history
- Any new credit applications
- What kinds of credit you currently have
When insurance companies take your driving history and profile into account, they’ll look at the following items when making an auto insurance score calculation:
- Previous violations, such as speeding tickets, at-fault, or DUI citations
- Your claims history
- Your age and driving experience
- The vehicle you drive and how many miles you drive
- Your zip-code
- Gaps in your insurance history
The majority of online scores are based on your credit rating. However, when you get a quote, insurance companies take other factors into consideration too. That’s why it’s even more prudent to get quotes from as many insurers as possible instead of worrying about where you stand on the insurance score chart.
While there’s no universally accepted way to determine your score, any estimate you can get from the major agencies will be a reliable indicator of how much you’ll need to pay for car insurance. That’s why it’s beneficial to do a quick online check. With this in mind, you can learn first-hand how much a driver with your profile needs to pay
Frequently Asked Questions
1. Is 840 a good car insurance score?
Yes, it is. This score represents a preferable client among the ranking systems of every notable insurance analytics company. With a score this high, you’re bound to be offered some of the lowest premiums on the market.
2. Do insurance companies check your credit score?
Yes, about 95% of auto insurance companies use a credit-based insurance score. They do this because there’s a firm statistical link between a low credit score and an increased likelihood of making a claim. However, laws in Hawaii, California, and Massachusetts prohibit using your credit rating while determining premiums.
3. Can you get car insurance with bad credit?
Yes, although it will be considerably more expensive. Some states, such as Tennessee, even have a special program for drivers who have a hard time finding an insurer. If your insurance score is low and a couple of insurance companies have rejected you, you may enter the program. In it, you’ll be randomly assigned to an insurer. However, it’s still prudent to shop around. It might turn out there’s an insurer willing to take you on, and you’ll pay a substantially lower premium if you don’t go through this kind of program.
4. How is an insurance score calculated?
No two insurance companies use the same method to make these calculations. Nonetheless, the majority of them will look at your credit reports to determine your rates. Additionally, they’ll look at direct underwriting factors, which have an obvious link to your likelihood of making a claim. These include your driving record, a lapse in insurance, the make and model of your car, your location, and your age and driving experience.
5. What’s a good auto insurance score range?
Anything above 750 is widely accepted as a good insurance score no matter which company did the rating. Additionally, anything above 800 is considered an excellent result, meaning you will be able to buy quite affordable car insurance coverage.
6. Will my credit rating be affected by my auto insurance score?
No. Once an insurance company or their representative obtains your credit report, an inquiry will be added to your record. However, these inquiries do not affect your credit rating, and they aren’t supplied to potential lenders.