Auto insurance score

What is an auto insurance score?

When an insurance company issues quotes to prospective clients, each client’s quote is, to an extent, influenced by his insurance score, which is determined by his overall credit rating. It is believed that a significant connection exists between a person’s credit rating and the number of insurance claims he or she files.

Unlike your credit score, which is based on your ability to repay the money you borrow, your insurance score predicts your likelihood of becoming involved in an accident. Insurance score computations do not include your financial statement or income, as is the case when your credit score is computed. But a higher credit score will get you a lower premium cost, while a lower score means a higher premium rate.

Deeper definition

To calculate your insurance score, the insurer is granted access to the Comprehensive Loss Underwriting Exchange, also known as CLUE, and the Automated Property Loss Underwriting System, known as the A-PLUS databases. These provide the insurer with all of your filed claims and credit history, which are combined to come up with your insurance score.

The scores are provided by the Fair Isaac Corp. (FICO) and ChoicePoint. FICO has scores ranging from 300 to 900, while ChoicePoint has scores ranging from 300 to 997. A good insurance score is considered to be any number above 800, while a poor score is any number below 500. Different insurance companies have different standards when it comes to insurance scores. It is advisable to shop around and understand each company’s standards before settling for one.

Auto insurance score example

Insurance agencies give good insurance scores to clients with the lowest possibility of filing a claim. Your credit report can have a significant effect on your insurance premium, but it’s not the only factor that will be considered. Be sure to ask your insurer how other factors such as your age, marital status, location, type of car, and applicable insurance discounts affect your premium.

Continually monitor your credit reports to make sure they are accurate. An “adverse action notice” is sent to you if your credit score leads to a reduction in your coverage limit, a higher premium, a cancellation of your policy, or a decline in its renewal.

One of the ways you can improve your auto insurance score is by making timely payments on your debts and doing all you can to maintain a solid credit history. Practicing safe driving habits and resolving minor damages to your vehicle by yourself, without involving the insurance company, also improve your insurance score.

Use our auto loan calculator to figure the monthly payment on your next new or used vehicle.

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