How Your Insurance Score Impacts Your Car Insurance Rates

How Your Insurance Score Impacts Your Car Insurance Rates

What's an insurance score?

An insurance score is similar to a credit score, but insurance scores use information in your credit file to help determine how likely you are to file an insurance claim. Different insurance companies calculate insurance scores differently, but with most insurers your insurance score is a significant factor in determining your rate -- sometimes just as important as your driving record.

Why do insurers care about my credit history?

Studies have shown a direct correlation between a person's credit and the likelihood of him or her filing a claim. Individuals with poor credit history are generally more likely to file car insurance claims, so they will often pay above-average car insurance rates. Similarly, people with excellent credit histories are generally less likely to file car insurance claims and will often be rewarded with lower-than-average rates.

Is this fair?

Many people don't like the fact that their credit scores are being used as an underwriting factor for their car insurance rates, but for most drivers this fact isn't going to change anytime soon. Three states -- California, Massachusetts and Hawaii -- currently forbid insurers from using credit data when determining car insurance rates. But every other state allows it to some degree.

How can I keep my rates as low as possible?

The best thing to do is to take excellent care of your credit. But if your credit score is already low and you need to purchase an auto insurance plan right away, there's likely not much you can do about your rates in the short term.

The next best thing to do is to shop around for car insurance quotes from multiple providers. All carriers use insurance scores in different ways, so you may be able to get a better deal at a different provider, but consider the potential consequences of rate shopping before you do it.

Editorial Note: The editorial content on this site is not provided by the bank or issuer. Opinions expressed here are author's alone, not those of the bank or issuer, and have not been reviewed, approved or otherwise endorsed by the bank or issuer. Credit Karma may be compensated by companies mentioned through advertising, affiliate programs or otherwise. It is this compensation that enables Credit Karma to provide its members with services like free access to your credit scores and free monitoring of credit and financial accounts at no charge.

 

Disclaimer: All information posted to this site was accurate at the time of its initial publication. Efforts have been made to keep the content up to date and accurate. However, Credit Karma does not make any guarantees about the accuracy or completeness of the information provided. For complete details of any products mentioned, visit bank or issuer website.

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1 Contribution
43 People Helped

Helpful to 43 out of 50 people

Complete bull****! how can you have a good credit score and very poor insurance score? with a clean driving record!! not one ticket, and any accidents (years old) not even my fault. Obviously another scam to put more money in the wrong pockets!

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Reply by
SES1894

11 Contributions
25 People Helped
Helpful to 12 out of 12 people

Traffic tickets?  Traffic tickets are not known by the credit reporting agencies and thus do not contribute to your credit score.  But the insurance companies certainly buy that from your Secretaries of State.  Illinois has done this for at least 50 years.

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33 Contributions
460 People Helped

Helpful to 141 out of 154 people

Car Insurance is a complete rip off. What does my Credit have ANYTHING to do with my driving record. It is totally absurd and they just use it as a ploy so that they can charge you more for a bogus reason. First off all, Car Insurance is required by law, so if I want to drive I MUST have car insurance. They don't give you any leeway or grace period in paying. You pay up front and if you don't pay within a few days, they report you to the DMV which will result in suspension of your registration and eventually your driver license. So the need to pay your insurance is more important than your cell phone bill otherwise you have to pay lapse fees with your DMV and get reinstated.

In addition they state that people with bad credit are more likely to file a claim, which sound very bougs to me and I don't know who conducted that research. We all know that everytime you file a claim your insurance goes up plus you have a deductible so why would anybody just file a claim unless they had a real reason to. Isn't that what insurance is for? Unfortunately, this business turned into "We will insure you but you better not file a claim".  Insurance is suppose to "insure" you for any mishapp that may occur.

but just like the article says, there is nothing you can do about it, it is government mandated and you have to have insurance if you want to drive, these insurance companies continue to rip us off because we do not get anything back from our years of payments, insurance companies get to keep all of it and when you need it they will try anything to NOT do what they suppose to. It's legal extortion. point blank

Reply by
hoinburg182

4 Contributions
55 People Helped
Helpful to 43 out of 46 people

One thing I have found that effects my Insurance score as well my FICO, is a high debt utilization %. The closer I got to my credit limit the worse my Insurance score got. I paid down my cc debt well below 30% and poof my Auto insurance renewal went down around 11% for 6 months. Everytime I shop for new insurance, I use this method and my friends dont understand why my Insurance has better coverage for a cheaper premium. Something to try and I'm located in MI, The second highest rated state ( thanks to no-fault insurance and the unlimitied medical coverage required by this fine state MCCA).

Reply by
flipped54

2 Contributions
41 People Helped
Helpful to 41 out of 52 people

Yes, I agree, that's why corporate America exists.  To make as much money as they can, when they can and where they can.  They have absolutely no empathy, sympathy nor do they care about anyone but themselves.  This is pure, unregulated Capitalism which is embraced wholeheartedly by those who are in the rip off business of insurance and by those in Congress who do not like a system where all Americans are fairly rated for insurance.  As it is now the rating system is grossly flawed.  My personal opinion, but if it is out of line let me know.  

2 Contributions
35 People Helped

Helpful to 21 out of 23 people

I'm paying $390 a month with progressive.  I have a poor insurance score.  My friend quoted with the same vehicles and he was at $190 a month with excellent credit with 2 drivers and my same 2 vehicles.  Apparently insurance scores can double premiums.  This is extortion and should be illegal in every state.

1 Contribution
21 People Helped

Helpful to 21 out of 22 people

I would like to know what is the source of their research is. This article states that there is research, but fails to name the source. Is it insurance companies, independent research, or just some opinionated rhetoric that has been handed down by word of mouth.

When articles like this are written, it should be SOP to state the source of the information just as if it were a research paper.

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Reply by
SES1894

11 Contributions
25 People Helped
Helpful to 9 out of 9 people

It wouild be pretty simple for the insurance industry to do a match between credit scores and accident claim costs, seeing as how for some time the insurers have been getting their customer's credit scores and they already have the customer's total claims costs on their computer databases.  Several companies could pool this data anonomized to just zip code, score and if desired, age. Then by analyzing the whole pool  ofdata, get a state or national assessmentbroken down by age and score.

I was a computer programmer for 34 years.  Analysis such as this is actually very simple and easy to do.

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