Understanding Your Auto Insurance Score

Auto insurance scores are numerical scores used to predict the likelihood of a person filing a claim or having a car accident. These scores are calculated from information on credit reports and are used by car insurers to determine insurance rates. While the exact methods used to calculate insurance scores vary by company, FICO, a well-known credit-scoring company, weighs factors such as payment history, outstanding debt, length of credit history, pursuit of new credit, and mix of credit experience. Individuals can request their insurance scores from companies like LexisNexis or directly from their insurance providers. Additionally, improving one's credit score and maintaining a good standing across all accounts can positively impact auto insurance scores.

Request your score from LexisNexis or your insurance company

To request your auto insurance score from LexisNexis, you can contact the LexisNexis Risk Solutions consumer centre by phone or online. LexisNexis Risk Solutions is a global business that provides services to insurance companies and agents, including access to credit-related information. You will need to provide some personal identifiable information to allow them to authenticate your identity.

LexisNexis Risk Solutions is considered a consumer reporting agency as defined by the Fair Credit Reporting Act (FCRA). The FCRA is a federal law designed to promote the accuracy, transparency, and permissible use of information furnished to users deciding on eligibility or underwriting criteria for credit, employment, insurance, and other permitted uses. As such, LexisNexis is committed to the responsible use of data and has a dedicated team and process that focuses on providing a smooth, secure experience for consumers to obtain their consumer report information.

Your auto insurance score from LexisNexis may be based on a number of factors, including your credit history, driving behaviour, and vehicle risk. LexisNexis provides a list of reason codes and their meanings, which can help you better understand the credit attributes that inform your insurance score.

Alternatively, you can request your auto insurance score directly from your insurance company. Auto insurance scores are numerical scores used to predict the likelihood that you'll have an accident or file a claim. These scores are calculated from information on your credit reports and are used by car insurers as one of many factors to determine your insurance rate.

Your auto insurance company can inform you of the specific auto insurance scoring model and formula they use, as well as the company that provides it. For example, some insurers purchase credit-based insurance scores from companies like FICO, which weighs factors such as payment history, outstanding debt, and length of credit history to determine its auto insurance scores.

By understanding your auto insurance score, you can work towards improving it and potentially lowering your insurance premiums.

Understand the difference between a credit score and an auto insurance score

Credit scores and auto insurance scores are calculated using similar information, but they have distinct purposes and are used by different types of companies.

A credit score is a measure of creditworthiness that lenders use to decide whether to approve loan applications and choose the terms of an account. Credit scores are based on credit reports and typically range from 300 to 850. The higher the score, the greater the creditworthiness.

An auto insurance score, also known as a credit-based insurance score, is used by insurance companies to predict the likelihood of a person filing an insurance claim. It is calculated using information from credit reports, including payment history, credit card balances, credit limits, and credit history. Auto insurance scores typically range from 200 to 997, with a good score being around 770 or higher.

While both types of scores are based on credit reports, they are calculated differently and serve different purposes. Credit scores are used by lenders to assess loan applications, while auto insurance scores are used by insurance companies to set insurance premiums. Auto insurance scores also consider non-credit data, such as information from public records.

It's important to note that auto insurance scores are not available to consumers in the same way that credit scores are. While individuals can easily access their credit scores and reports, obtaining their auto insurance scores may be more challenging. However, having a good credit score is generally indicative of a high auto insurance score.

In summary, credit scores and auto insurance scores are similar but not identical. They are calculated using similar information from credit reports, but they serve different purposes for different types of companies. Understanding the distinction between these scores is essential for managing personal finances and insurance-related matters.

Learn how auto insurance scores are calculated

Auto insurance scores are calculated using information from credit reports, and they are used to estimate how likely drivers are to file a claim. While they are based on your credit history, they are not directly tied to your credit score.

In the early 1990s, insurance companies found that credit-based auto insurance scores could help them predict the likelihood of a driver having a car accident or filing a claim. This means that factors outside of your driving record can influence how insurable you are.

Insurance scores are numerical scores, and a higher score indicates that you are less likely to file a claim. A good insurance score is usually considered to be around 700 or higher, but this can vary depending on the company.

While each company uses its own methodology to interpret the credit information that builds your insurance score, some insurers purchase credit-based insurance scores from companies like FICO. FICO weighs the following factors to determine its auto insurance scores:

• Payment history (roughly 40%)
• Outstanding debt (roughly 30%)
• Length of credit history (roughly 15%)
• Pursuit of new credit (roughly 10%)
• Mix of credit experience (roughly 5%)

Your auto insurance score can affect how much you pay for insurance. A lower score means you are potentially a higher insurance risk and may result in a higher premium. Conversely, a higher score indicates that you are a low-risk customer and you will likely pay a lower insurance premium.

Find out how to improve your auto insurance score

Improving your auto insurance score can help you secure better car insurance rates. Auto insurance scores are calculated based on information in your credit reports, so improving your credit score will also have a positive impact on your auto insurance score. Here are some ways to improve your auto insurance score:

Get a Credit Report

Obtain a credit report to understand your current credit score and identify areas for improvement. You can get a free credit report once a year from the three main reporting bureaus: Equifax, Experian, and TransUnion. Review your credit report to ensure all the information is correct and identify any discrepancies, such as wrongful late payment faults or unexpected penalties.

Pay Bills on Time

Paying your bills on time is a simple yet effective way to improve your credit score and, subsequently, your auto insurance score. Set reminders or use sticky notes to ensure you never miss a bill payment deadline.

Avoid Opening Too Many Credit Accounts

Opening multiple credit accounts simultaneously can be a red flag for auto insurance scores. It may portray you as a risky borrower, negatively impacting your insurance score. Instead, open new accounts gradually and maintain a good standing in all your accounts.

Keep Accounts Open

Keeping credit accounts open for an extended period demonstrates stability and financial responsibility. It is beneficial to keep your oldest credit accounts open to showcase a long-established track record.

Maintain Low Outstanding Balances

Aim to keep your outstanding balances low. Utilising 75% or less of your available credit is ideal, as it indicates financial management. Specifically, using 20-30% of your available credit is considered a sweet spot, demonstrating wise credit usage.

Other Tips:

• Regularly review your credit report to identify any issues or discrepancies.
• Avoid "quick" credit fixes, as good credit is built over time.
• Create a plan to effectively pay down existing debt without incurring new debt.
• Limit new debt and work with your creditors to resolve outstanding balances before they are sent to debt collectors.
• Keep your credit utilisation ratio low, as a high ratio can negatively impact your insurance score.
• Avoid making late credit payments or allowing accounts to go into collections.
• Be mindful of the number of new credit applications, as multiple applications in a short period may hurt your score.

By implementing these strategies, you can work towards improving your auto insurance score and potentially secure better car insurance rates.

Discover the history of auto insurance scores

The history of auto insurance scores dates back to the early 1990s when credit-based auto insurance scores were introduced. These scores are used to predict the likelihood of a driver having a car accident or filing an insurance claim, which could result in financial losses for insurance companies. The scores are based on information from credit reports, including payment history, outstanding debt, length of credit history, new credit applications, and the mix of credit experience.

In the 1990s, insurance companies discovered that credit-based auto insurance scores could help them better predict the probability of policyholders filing claims. This allowed them to set rates based on the likelihood of claims, with lower scores indicating a higher risk and higher premiums. The specific factors and weights used in calculating insurance scores vary across companies, but they generally include credit history, accident history, and previous insurance claims.

While auto insurance scores are not directly tied to credit scores, data shows a correlation between the two. Drivers with poor credit scores tend to pay higher insurance rates compared to those with excellent credit scores. Additionally, certain states, such as California, Hawaii, and Massachusetts, have banned the use of credit history in calculating auto insurance rates, while others have placed restrictions on its use.

Over time, insurance companies have refined their methods for calculating auto insurance scores, and the scores have become a significant factor in determining insurance premiums. By analysing credit information and driving records, insurance companies can assess the risk of insuring a driver and set rates accordingly. This helps them manage their risk and ensure profitability while also providing an incentive for drivers to maintain a good credit history and safe driving record.

Frequently asked questions