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Insurance Score Guide

Posted by / Filed in: Auto Insurance, Business Insurance, Financial Services, Health Insurance, Home Insurance, Life Insurance

Insurance Score Guide

No doubt you already know that your credit score is used as a factor in determining whether you can get a loan for a house or car and how much your interest rate will be on those loans, but did you know that your credit score can affect how much you pay for insurance, too? If not, that’s why we’re giving you the ultimate insurance score guide.

Most insurance companies—more than 90 percent, according to Erie Insurance—use your credit history to develop a numerical rating called an insurance score, which is then used to calculate your insurance premiums. Policyholders with favorable insurance scores often pay lower premiums than those with unfavorable scores.

Some of the attributes of your credit history that we and our insurance carriers, such as Erie, consider include:

  • New credit applications
  • Payment history
  • Outstanding credit amounts
  • Types of credit and the length of credit history
  • Bankruptcies filed

Unlike credit scores, however, insurance scores do not take into account your income. Insurance scores also do not consider your religion, age, race, gender, marital status, national origin, or location of residence. “Insurance scores take into consideration only those characteristics from a credit report that are relevant to predicting loss potential,” according to Erie.

Credit Scores and Loss Potential

So how exactly does your credit score show your loss potential? “Credit information is very predictive of future accidents or insurance claims, which is why Progressive, and most insurers, use this information to help develop more accurate rates,” according to Progressive.

In addition to credit history, some insurers also use your accident and insurance claim history to determine your insurance score. “The results of this analysis tell us what credit information will help us predict how likely you are to have a future accident or insurance claim,” according to Progressive.

If your credit history has some blemishes, don’t worry. Insurance companies aren’t allowed to deny you auto or home insurance coverage based solely on your insurance score. Insurance scores aren’t the only factor that we use to determine your insurance premiums either. We calculate auto insurance premiums, for instance, using additional criteria such as your driving record, the type of car you drive, and how far you drive on an annual basis.

Improving Your Insurance Score

There are some ways to improve your insurance score if it’s causing you to have higher insurance premiums. “Improving your credit-based insurance score is just like improving your regular credit score,” according to an article published by the National Association of Insurance Commissioners. “Make payments on time. Pay bills, taxes and fines/fees as agreed. If you are behind on payments, catch up and stay current. Keep balances on credit cards as low as possible.”

Do you have questions about your insurance score and how it might be affecting your insurance premiums? Smallwood and Small’s expert agents can help with an insurance score guide. Call 304-263-3361 to talk to an agent at our office in Martinsburg, West Virginia, or call 304-229-7227 to reach our Inwood office.


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