What is a good credit score for auto insurance?

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.... read full answer

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.

Yes, credit affects car insurance premiums in every state except for California, Hawaii, and Massachusetts. Car insurance companies use credit score as one factor in determining premiums because credit history correlates with a driver's likelihood of filing a claim. Insurance companies do not use a consumer's standard credit score, though. Instead, they look at a driver's ... read full answerauto insurance score, which is based on the same information as a credit score, like payment history and debt.

Roughly 95% of personal car insurance companies use auto insurance scores when calculating premiums, according to FICO. People with no credit history pay an average of 67% more for auto insurance than drivers with excellent credit as a result. However, insurance companies consider factors besides credit as well. Your driving record, age, vehicle, and location can all affect your premium, too.

It’s also important to realize that you are still protected from unfair practices, even when car insurance companies are allowed to use credit in your state. For instance:

• Insurance companies in most states are not allowed to deny coverage simply because of an insurance score.

• Many states allow drivers to request that their insurance score not be considered if it was negatively affected by a major life event like a divorce, a death in the family, or an involuntary job loss. If your state has such laws, your insurance company is required to comply.

Finally, the fact that credit scores and insurance scores are based on similar information means that credit-score improvement can result in cheaper car insurance premiums, too. You can check your latest credit score for free with WalletHub and get customized advice for how to improve your credit.

You can increase your auto insurance score by making sure you build a long and healthy credit history. Keep in mind that anything you can do to raise your credit score will also positively affect your auto insurance score.

How to Improve Your Auto Insurance Score

1. Pay off debt.
2. Keep your credit accounts open, even if you aren’t using them.... read full answer
3. Automate your payments to avoid forgetting them.
4. Keep your credit utilization ratio below 30%.
5. Don’t apply for credit too often.
6. Check your credit report for errors.
7. Become an authorized user or open a secured card if you have bad credit.
8. Vary the types of credit you use.

Like credit scores, auto insurance scores are based on a combination of factors, including your payment history, the amount you owe, the length of your credit history, and the types of credit you have. Improving any or all of these factors can raise your auto insurance score and therefore lower your premium.

In general, auto insurance scores help insurance companies determine premiums because evidence shows that drivers who are responsible with money are safer on the road. Insurance companies will also look at your driving history and claim history when determining your risk level so keeping those clean as well could represent an advantage.

To find out more, read WalletHub’s complete guide to auto insurance scores. You can also sign up for a free WalletHub account to get free credit scores and customized credit-improvement advice.