Factors Influencing Your Auto Insurance Score

Auto insurance scores are ratings based on information from credit reports that insurers use to estimate how likely drivers are to file a claim. These scores are based on your credit history, not your driving history. While each insurer has its own proprietary underwriting system for calculating an insurance-based credit score, common factors that usually factor into this score include: payment history, outstanding debt, length of credit history, pursuit of new credit, and credit mix. A good auto insurance score is roughly 700 or higher, though it differs by company. Your auto insurance score will affect your insurance rate, with lower scores meaning drivers are riskier to insure and will likely pay a higher premium.

Credit history

Insurance companies use what is called a "credit-based insurance score" to assess the likelihood of you filing an insurance claim. This score is based on your credit history and helps determine the risk of having you as a client. A higher credit-based insurance score indicates that you are a low-risk customer and will likely pay a lower insurance premium. Conversely, a low score suggests a higher risk, potentially resulting in a higher premium.

The credit-based insurance score is calculated using various factors from your credit history, including your outstanding debt, the length of your credit history, your credit mix, and your payment history. These factors are weighted differently by insurance companies, resulting in unique scoring models for each insurer.

It is important to note that improving your credit history can take time, but it is worth the effort to ensure you receive the lowest possible rate for your auto insurance policy. Paying your bills on time, maintaining old lines of credit, and keeping your credit utilisation ratio below 30% are some effective strategies to enhance your credit score and, consequently, your insurance score.

Driving record

Your driving record is a key factor in determining your auto insurance score and, consequently, your insurance rates. A history of accidents or moving violations, such as speeding tickets, will likely result in a higher insurance score and more expensive rates. Insurance companies view these incidents as indicators of higher risk and will charge you a higher premium to compensate for the increased likelihood of future claims.

The impact of your driving record on your insurance score and rates can vary depending on the insurance company and their proprietary scoring methods. Some insurers may weigh driving records more heavily than others, so it is essential to shop around and compare quotes from multiple providers. Additionally, the impact of your driving record on your insurance score may diminish over time as older incidents drop off your record.

It is worth noting that public driving records are generally not included in insurance score calculations. However, insurance companies will still take into account any driving violations from the last 10 years when determining your rates. Therefore, maintaining a clean driving record is crucial for keeping your insurance rates low.

While your driving record is a significant factor in determining your auto insurance score, it is not the only consideration. Credit history, previous claims, and other factors also play a role in calculating your insurance score and rates. By improving your credit score and avoiding frequent claims, you can help offset the negative impact of a less-than-perfect driving record on your auto insurance rates.

Type of car

The type of car you drive is a factor that affects your auto insurance score. Auto insurance companies use auto insurance scores to evaluate your risk and determine your insurance premiums. These scores are calculated based on information related to your debt, payment, and borrowing habits. The type of car you drive can influence your auto insurance score by indicating the potential risks associated with that particular vehicle.

For example, if you drive a sports car, your insurance score may be higher due to the perception of increased risk. Insurance companies might assume that sports cars are more likely to be driven at high speeds, increasing the chances of accidents and subsequent insurance claims. On the other hand, if you drive a car with advanced safety features and a good safety rating, your insurance score could be lower as the vehicle is perceived as a lower risk.

Additionally, the value of your car can also impact your auto insurance score. More expensive and luxury vehicles often have higher insurance scores because they are costlier to repair or replace in the event of damage. Insurers may also consider the safety features, theft rates, and accident history associated with the specific model of your car when calculating your insurance score.

It's important to note that auto insurance scores are not standardized across all insurance companies. Each insurer may weigh the different factors differently, resulting in varying insurance scores for the same type of car. Therefore, it's always a good idea to shop around and compare insurance quotes from multiple providers to ensure you're getting the best rate for your specific vehicle.

Insurance claims history

The number of insurance claims you've made in the past is a key factor in determining your auto insurance score. A high number of claims will negatively impact your score, as insurers interpret this as a higher risk of future claims. This, in turn, will affect your insurance rate, with higher scores leading to lower rates.

Insurers will also take into account the frequency of your claims when determining your insurance score. A high number of claims in a short period will hurt your score and ability to get good rates.

The impact of your claims history on your insurance score can differ across states. Most states allow insurers to factor in your claims history when determining rates, but some states, like California, Hawaii, Massachusetts, and Michigan, have regulations that limit or prohibit the use of claims history in setting average car insurance premiums.

In addition to your claims history, other factors that contribute to your auto insurance score include your credit history, accident history, and driving record. Improving your insurance score can be done by focusing on improving your credit score, reducing the number of insurance claims, and safe driving.

Credit score

The exact weightings of credit factors in insurance scores vary across companies and states, but some common elements include payment history, length of credit history, types of credit, and credit utilisation. For example, Nationwide's insurance score considers payment history, length of credit history, and types of credit, while explicitly excluding sex, marital status, age, ethnicity, address, and income. Progressive's insurance score, on the other hand, is based on an analysis of accident and insurance claim history, as well as credit report information from their policyholders.

It's important to note that insurance scores are not the same as credit scores used by lenders. While both consider similar factors, they assign different weights to these factors. For instance, payment history carries more weight in insurance scores than in credit scores, according to data analytics company FICO. Additionally, insurance scores range from 300 to 850 but don't follow the same tier system as credit scores, so a "good" credit score may be considered "average" or "poor" by insurance companies.

The impact of credit scores on auto insurance rates also varies depending on state regulations. Four states in the US—California, Hawaii, Massachusetts, and Michigan—ban the use of credit scores in determining insurance rates. Some other states, like New Jersey and Rhode Island, prohibit insurance companies from charging higher rates due to a lack of credit history. In contrast, states like Washington, D.C., New York, New Jersey, Texas, and Florida allow credit scores to significantly influence insurance rates, with poor credit resulting in rates that are more than double the average.

Improving one's credit score can be a way to lower auto insurance rates. This can be achieved by making timely bill and debt payments, maintaining a low credit utilisation rate, and disputing any errors on credit reports. Additionally, individuals can shop around for better insurance rates, as getting quotes does not negatively impact credit scores.

Frequently asked questions