A credit score is a mysterious thing, but we all know they exist. What you may not know is that you also have an auto insurance score lurking out there. Yep - whether or not you're buying a car or in the market for insurance, you probably still have one.
In a nutshell, your auto insurance score represents an estimate of your auto insurance risk. Credit-based auto insurance scores are used in nearly every state (a handful of states severely restrict or prohibit their use). Many auto insurance companies use these scores to help price premiums and determine rates for their customers.
If auto insurance scores are still a mystery to you, read on and take a peek behind the curtain.
What credit report factors go into an auto insurance score?
If you've been doing your research, this is going to sound pretty familiar to you. Your auto insurance score is generally calculated using the following information from your credit report:
The credit-based insurance score itself won't be based on information that isn't on your credit report, like your driving record, but insurance companies do still consider non-credit factors as part of their overall insurance risk evaluations.
Insurance companies may use their own proprietary models or scoring models from other providers like FICO or a credit bureau. So while the factors I listed earlier are commonly used, they could be weighed differently or different factors could also be included depending on the source determining the score.
Why should I care about my auto insurance score?
We're talking dollars here. You could be charged a higher or lower premium because of your auto insurance score. Of course, it's only one aspect that your insurer will dissect when deciding your rate. They'll consider other factors too, like your claims history, driving record and traffic tickets. Still, many insurers rely in significant part on scores, and studies show that they get the job done. A 2007 Federal Trade Commission study found that auto insurance scores are effective at predicting auto insurance risk. This means that your auto insurance score has real weight with most prospective insurers.
These scores don't only come into play when you're shopping around for rates. If you have an existing policy that's expiring, your company may review your score again and change your rates. Just like you would regularly monitor your credit score and report in the hopes of purchasing a home, you should keep an eye on your credit health with your auto insurance plan in mind.
If you're in the market for a new auto insurance plan, keep an eye on your credit to try to prevent possibly paying out more. However, like I mentioned earlier, insurance companies take more into consideration than just your score. Your insurance score isn't necessarily going to make or break your premium, so keep your credit in check and enjoy the open road.
About the Author: Charmaine Ng is the Communications Coordinator at Credit Karma. When she isn't writing her way through life, you can find her reading about the latest in entertainment and watching television almost every night of the week. Say "hi" @noodlemaine!
Editorial Note: The opinions you read here come from our editorial team. While compensation may affect which companies we write about and products we review, our marketing partners don't review, approve or endorse our editorial content. Our content is accurate (to the best of our knowledge) when we initially post it, but we don't guarantee the accuracy or completeness of the information provided. You can visit the company's website to get complete details about a product. See an error in an article? Use this form to report it to our editorial team. For questions about your Credit Karma account, please submit a help request to our support team.
Advertiser Disclosure: We think it's important for you to understand how we make money. It's pretty simple, actually. The offers for financial products you see on our platform come from companies who pay us. The money we make helps us give you access to free credit scores and reports and helps us create our other great tools and educational materials.
Compensation may factor into how and where products appear on our platform (and in what order). But since we generally make money when you find an offer you like and get, we try to show you offers we think are a good match for you. That's why we provide features like your Approval Odds and savings estimates.
Of course, the offers on our platform don't represent all financial products out there, but our goal is to show you as many great options as we can.