Understanding Insurance Scores: Aiming For The Perfect Rating

An insurance score is a credit-based metric used by insurance companies to assess an individual's probability of filing an insurance claim. The score is based on the individual's credit rating and will affect the premiums they pay for coverage. A high insurance score is generally considered to be 700 or above, with scores above 800 deemed exceptional. A high insurance score will result in lower insurance premiums, while a low score will lead to higher premiums. The insurance score is one of the primary factors in determining the monthly insurance premium.

The connection between insurance and credit scores

An insurance score is a credit-based metric that insurance companies use as part of their risk calculations when issuing quotes for insurance. While insurance scores are confidential, they are based on the same credit information that goes into a FICO credit score.

Credit-based insurance scores help insurance companies better understand their risk when approving a policy. According to the Insurance Information Institute (Triple-I), actuarial studies indicate that consumers with lower credit scores may be more likely to file claims, thus posing a greater financial risk for insurers. Therefore, a high credit score is likely to result in a high insurance score, which will lead to lower insurance rates. Conversely, a low insurance score will result in higher insurance rates.

It is important to note that not all states allow the use of credit-based insurance scores in determining premiums. Some states only permit it as one factor for property insurance, such as auto and homeowners insurance. Other states allow it to be used with any type of insurance. As of March 2025, seven states have strict limitations on the use of credit with auto or homeowners policies: California, Hawaii, Maryland, Massachusetts, Michigan, Oregon, and Utah. In these states, your credit score will not impact your insurance rates.

How to improve your insurance score

An insurance score is a credit-based metric that insurance companies use to evaluate your risk of filing a claim and set the cost of your insurance policy. The higher your insurance score, the lower your insurance rates will be. While insurance scores are confidential and vary depending on the company that is issuing them, a score of 770 or more is generally considered good.

• Pay your bills on time: Non-payment or late payments can hurt your insurance score. Make sure to pay any mortgage, credit card, and other loan payments on time.
• Lower your debt: Keep your outstanding balances at least 75% below your available credit. Lowering your ratio of debt to available credit can help raise your credit-based insurance score.
• Limit credit applications: Avoid filling out numerous credit card applications in a short period of time.
• Build your credit history: Establish a long track record of responsible financial behaviour, which will have a positive impact on your insurance score.
• Work with your creditors: Resolve outstanding balances before they are turned over to a debt collector.
• Compare insurance providers: Some companies specialize in covering customers with poor credit at more affordable rates.

How insurance scores vary by company

Insurance scores are calculated using a lot of the same information as your credit score, such as payment history and the amount of debt. However, the exact methods that insurance companies use to calculate insurance scores are confidential and based on proprietary scoring models that vary from company to company.

For instance, TransUnion uses insurance scores that range from 300 to 900, while the LexisNexis Risk Classifier assigns scores between 200 and 997. A score of 770 or higher is generally considered good and will result in lower rates, while a score of 500 or below is considered poor and will result in higher rates.

In addition to the company-specific scoring models, insurance scores can also vary depending on the type of insurance being offered. For example, auto insurance scores may weigh certain factors differently than home insurance scores. Furthermore, insurance scores can be influenced by state regulations, with some states prohibiting or restricting the use of credit-based insurance scores.

While it is difficult to determine what constitutes a "good" or "bad" insurance score due to the variation across companies, maintaining a strong credit score is generally recommended as a way to improve one's insurance score. This can be achieved through on-time payments, lowering debt, and limiting credit card applications.

The impact of insurance scores on insurance rates

Insurance scores are a key factor in determining insurance rates. These scores are based on credit history and are used by insurance companies to assess the likelihood of future insurance claims. While the specific calculation of insurance scores is not transparent, they are based on credit scores, with factors such as payment history and credit mix being considered. A high credit score is likely to result in a high insurance score, which leads to lower insurance rates.

Insurance scores are confidential and vary depending on the scoring model used by the insurance company. While FICO and TransUnion do not make their insurance scores available to consumers, LexisNexis provides a Consumer Disclosure Report. It is worth noting that some insurers, such as Say Car Insurance, disclose insurance scores. The range of insurance scores can be quite broad, from 200 to 997, or even 300 to 900, depending on the agency providing the data.

The use of insurance scores is controversial, and some states have prohibited or restricted their use in insurance pricing. California, Hawaii, and Massachusetts have banned the use of insurance scores in car insurance pricing, while California, Massachusetts, and Maryland have also restricted their use in setting home insurance rates.

To improve insurance scores, individuals should focus on improving their credit-related factors, such as paying bills on time, lowering their credit utilization, and maintaining a strong track record of on-time payments. By doing so, they can positively impact their insurance rates.

States that have banned the use of insurance scores

An insurance score is a credit-based metric that insurance companies use to calculate your rates. The higher your insurance score, the lower your insurance rates. A good insurance score is generally considered to be 770 or above, and a score of 500 or below is considered poor.

While insurance scores are used across the United States, some states have banned their use. Here is a list of states that have restricted the use of insurance scores:

• California: Insurance companies cannot use credit scores or credit history information when approving or determining rates on auto policies or home insurance.
• Hawaii: Auto insurers are banned from using credit ratings when setting underwriting standards or rating plans, which determine insurance premiums.
• Massachusetts: Auto insurers cannot use credit scoring when setting rates, approving, or renewing an auto policy. Homeowner insurance companies also cannot base rates on a customer's credit information.
• Michigan: Auto and home insurers cannot use credit scoring when approving, denying, cancelling, or renewing policies. Auto insurance companies also cannot use credit scores to determine insurance rates.
• Oregon: Insurance companies cannot use credit information to cancel or deny a policy approval. Credit cannot be the only reason an insurance provider denies an application.
• Washington: In March 2022, Washington announced a temporary ban on insurance companies using credit reports and credit scores to change rates and premiums on insurance policies. This ban covers auto, renter, and homeowner insurance. However, this ban was overturned in August 2022.

It is important to note that these laws may change over time, and there may be nuances to how insurance scores are restricted in each state. Additionally, even in states that limit the use of credit scores for auto or home insurance, there may not be restrictions on their use for life insurance.

Frequently asked questions