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Facts about Insurance & Credit


Credit-based insurance scores give insurance companies another tool to ensure that customers get a fair rate, based on each policyholder’s unique circumstances.  Some companies use a high insurance score to give policyholders lower preferred rates when other factors such as type of vehicle or driving record would usually require higher rates.

Using credit wisely is the best financial strategy for maintaining a healthy credit profile. FICO provides online tips to help you improve your credit-based insurance score or contact us for a free brochure that includes information about how to manage or improve your credit.

Here are some facts about Insurance Scoring:

  • An insurance score is a numerical rating based on factors such as timely payment of bills, public notices, bankruptcies, tax liens and credit inquiries. Some insurance scoring models also include prior claim history. 

  • Insurance scores have proven to be a very accurate way to predict future claims. Separate studies conducted for insurance regulators and insurance companies have shown a very strong, statistical relationship between low credit scores and frequent claims.

  • Insurance scores are one of many rating factors used to determine eligibility and rates.  Some others are age, driving record, vehicle, and mileage driven.

  • Insurance scores do not discriminate against lower income groups.  A low insurance score has nothing to do with income and everything to do with how people manage their money.  In fact, some of the best insurance scores appear among low and moderate-income groups.

  • An insurance score does not consider personal characteristics such as age, gender, income, net worth, home address or ethnicity.

  • Insurance scores do not include specific information about outstanding loans.

  • The Federal Fair Credit Reporting Act of 1970 (Amended in 2003) and Washington State's 1993 Fair Credit Reporting Act allow insurance companies to use credit information when evaluating insurance coverage. 

  • Your insurance score will not be affected by inquiries from most insurance companies.

  • Insurance companies protect your credit information by using trusted vendors to transmit the data and by maintaining the highest level of security with personal information.

As you hear and read more about the use of insurance scoring, please keep these facts handy to compare with other information you receive.