Auto Insurance Scores

An insurance score is a number based on your credit history that is intended to predict your likelihood of filing an insurance claim and thereby costing an insurer money. Auto insurance scores are also called credit-based insurance scores, and car insurance companies are allowed to take them into account when setting 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. 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.

Insurance Score Companies

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. Your score is based on five categories: 40% past payment history, 30% current level of indebtedness, 15% length of credit history, 10% new credit, and 5% variety of credit types.

• 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.

Controversy Over Insurance Scores

Since the connection between credit history and insurance risk isn't immediately clear to the average consumer, many people and advocacy groups disagree with the use of insurance scores. Even the FTC admits that insurance scores correlate with race and ethnicity, which has led to some protections for consumers.

For example, in states like Texas, insurers cannot refuse you coverage or increase your premium if your score decreased due to divorce, temporary unemployment, identity theft, the death of a close family member, or a similar life event. You can send a request in writing to an insurance company if one of these events affected your insurance score.

Similarly, New York law requires insurance companies to ignore credit as a rating factor for consumers with no credit, or to handle these consumers in another approved way, like treating the lack of credit the same as a neutral score. To find similar regulations in your state, visit its department of insurance website.

A good TransUnion auto insurance score is in the high 700s or above. TransUnion notes on its website that 770 is generally considered a good insurance score, but there are several different types of insurance scores with different score ranges. TransUnion auto insurance scores, also known as TransUnion TrueRisk scores or TransUnion Insurance Risk scores, range from 150 to 950, unlike typical credit scores.

On the other hand, LexisNexis insurance scores range from 200 to 997 and are considered good starting at 776. In addition, FICO scores fall between 300 and 900, with 700 and above classified as good. But it's important to remember that what these insurance-scoring companies think is a good score might not be exactly what an insurance company considers good enough to merit the lowest premiums.

TransUnion auto insurance scores are calculated using information from your credit report, just like your credit score. But insurance scores are designed to estimate your risk for insurers, not lenders. In most states, insurance companies can use your credit data as a factor in setting your premium, meaning that a higher score will save you money. On average, having no credit will cost you 67% on insurance compared to having excellent credit.

As a result, improving your credit score will help raise your insurance score, thereby decreasing your car insurance premium over time. With that in mind, make sure to check your latest credit score for free and use WalletHub's Credit Analysis tool to get personalized improvement tips.

A good credit score for car insurance is 700 or higher, and scores of 750 and above are considered excellent. People with good or excellent credit tend to pay much less for car insurance than drivers with no credit or bad credit. But even though you can tell a lot about your potential car insurance costs by checking your normal credit score, it's important to note that car insurance companies actually use credit-based auto insurance scores, which are a bit different.

Auto insurance scores are different from credit scores because they are designed to calculate your risk for insurance carriers rather than lenders. Like traditional credit scores, insurance scores are based on the contents of one of your major credit reports. But the categories are weighted differently than in your normal credit score, and the score ranges aren't always the same.  

While credit scores range from 300 to 850, FICO Auto Scores fall between 250 and 900. A good score is anything above 700. LexisNexis Attract Auto Insurance Scores go from 500 to 997, and scores above 776 are considered good. Finally, TransUnion auto insurance scores, officially called Insurance Risk Scores – Auto Model, range from 150 to 950. TransUnion doesn't specify what a good score is within its own range, but it does say that 770 is generally a good insurance score.  

Although auto insurance scores are important, every insurer uses them slightly differently, meaning that you should take the exact number with a grain of salt. Additionally, insurers in California, Hawaii, and Massachusetts are legally banned from taking credit information into an account. And in every state, many other factors affect car insurance rates, meaning that an insurance score is only one piece of the puzzle.

Unlike credit reports, you are not entitled to free information on your insurance score. However, you can purchase access to your insurance score from LexisNexis. Checking your credit reports and correcting any errors is also a smart move, since improving your credit score will raise your insurance score and lower your premiums.