An insurance score is a number based on your credit history that is used to predict your likelihood of filing an insurance claim and costing an insurer money. Auto insurance scores, also called credit-based insurance scores, can be used to set car insurance premiums everywhere except for Massachusetts, Hawaii and California.
The credit-scoring company FICO created the first insurance scores in 1993, and today FICO estimates that 95% of all personal insurers take insurance scores into account.
FICO scores are based on five categories:
- 40% past payment history
- 30% current level of indebtedness
- 15% length of credit history
- 10% new credit
- 5% variety of credit types
Multiple studies, including one by the Federal Trade Commission, demonstrate that the scores effectively predict risk for insurers, which is logical because individuals who responsibly handle their finances figure to be equally responsible with their cars or homes.
Where to Check Your Insurance Score
Insurance scores rely on information from your credit reports and are formulated by three main companies: FICO, LexisNexis, and TransUnion.
- FICO insurance scores range from 250 to 900.
- LexisNexis scores range from 300 to 950.
- TransUnion scores fall between 150 and 900.
In general, insurance scores of 770+ are considered good, but the specifics vary based on the type of insurance score, given the different ranges.
How to Raise Your Insurance Score
Your credit information strongly influences your insurance score, so raising your credit score can decrease your car insurance rates. You can get personalized advice on how to improve your credit score, as well as how long it will take, using the Credit Analysis feature of your free WalletHub account.
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