Credit Karma: Auto Insurance Scores And Their Location

Credit Karma offers a free service that allows users to check their auto insurance scores. These scores are used by auto insurance companies to assess the risk of insuring a consumer by predicting the likelihood that they will file a claim. Auto insurance scores are calculated using information from credit reports, and they can influence the premium rate. Credit Karma provides users with their auto insurance score from TransUnion, which typically ranges from 200 to 997. A good auto insurance score is usually considered to be 770 or higher. By understanding their auto insurance score, individuals can work towards improving their credit health and potentially lowering their insurance premium.

How to improve your auto insurance score

Auto insurance scores are numerical scores used to predict the likelihood that you’ll have an accident or make a claim. They are calculated using information from your credit reports and can influence how much you pay for car insurance.

• Get a credit report: Start by pulling your credit report from each of the three main reporting bureaus (Equifax, Experian, and TransUnion). Review the information and make sure there are no discrepancies or errors.
• Pay bills on time: Paying your bills on time is a simple yet effective way to improve your credit score and, in turn, your auto insurance score.
• Avoid opening too many credit accounts at once: Opening multiple credit accounts within a short time frame can be a red flag for insurance scores as it may indicate that you are a risky borrower.
• Keep accounts open: Keeping credit accounts open for a long time demonstrates stability and financial responsibility. If you have a long-established track record, consider keeping those accounts open to show your credit history.
• Keep outstanding balances low: Aim to use 20-30% of your available credit. Using more than this may indicate that you are unable to balance your finances effectively.
• Limit new debt: While it's important to show that you are using some credit, taking on too much new debt can negatively impact your score.
• Regularly review your credit report: You are entitled to one free credit report per year from each of the three main reporting bureaus. Reviewing your credit report regularly can help you identify any issues and take steps to improve your score.
• Avoid quick credit fixes: Building good credit takes time, so avoid shortcuts or quick fixes that may end up hurting your score in the long run.

What is an auto insurance score?

An auto insurance score is a numerical score used to predict the likelihood that you’ll have a car accident or file an insurance claim. It is a three-digit number, typically ranging from 200 to 997, with a score of 770 or higher usually being considered good.

Auto insurance scores are calculated using information from your credit reports, including payment history, outstanding debt, length of credit history, pursuit of new credit, and credit mix. They are used by car insurance companies to assess the risk of insuring you as a customer and to determine how much you’ll pay for your car insurance. A higher score indicates that you are a lower insurance risk, and you will likely pay a lower premium, whereas a lower score suggests you are a higher risk and will probably pay a higher premium.

Auto insurance scores were introduced in the early 1990s as a way for insurers to set rates based on the probability of policyholders claiming an insurance loss. While auto insurance scores are calculated using information from your credit reports, they are not the same as credit scores. Credit scores are used to determine how likely you are to repay a loan, whereas auto insurance scores focus on aspects that are believed to correlate more closely with filing insurance claims.

It's worth noting that certain states in the US have banned the use of credit when calculating insurance rates, including California, Hawaii, Maryland, Massachusetts, and Michigan.

How do insurance scores affect insurance rates?

Insurance scores are numerical scores used to predict the likelihood that you’ll have an accident or file a claim. They are calculated from information on your credit reports. Car insurers use auto insurance scores as one of many factors to determine how much you’ll pay for car insurance in states where that is allowed.

Actuarial studies suggest that how people manage their finances is a good indicator of how likely they are to file an insurance claim. So, in most states, insurance companies analyze your credit history to come up with your insurance score.

The better your insurance scores are, the lower your auto insurance rate will typically be. On the other hand, if your insurance scores aren’t doing well, your auto insurance rate will likely be higher.

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:

• Outstanding debt: This is the amount of debt you currently have.
• Credit history length: This shows how long you have had an open line of credit.
• Credit mix: This reflects different lines of credit, such as auto loans, mortgage loans, and credit cards.
• Payment history: This shows how well you have managed to pay your debts over time.
• Pursuit of new credit: This shows recent attempts to open new lines of credit.

Certain states have banned the use of credit when calculating insurance rates, including California, Hawaii, Maryland, Massachusetts, and Michigan.

How to access your FICO® Auto Scores

FICO® Auto Scores are scores that lenders use to determine how risky it is to lend to you. They are calculated based on your "base" scores, which are your traditional credit scores, and then adjusted based on industry-specific risk behaviour to create tailored auto scores. These scores can help creditors predict the likelihood that you will make auto loan payments as agreed.

To access your FICO® Auto Scores, you may need to pay a fee. FICO offers access to a handful of your credit reports and scores, including your FICO® Auto Scores, for $39.95 per month. However, before paying for credit monitoring, it is important to note that there are several versions of the FICO® Auto Score model, and the monitoring service may not provide the same version that your lender uses. Therefore, it is recommended to call your prospective lender's financing department to inquire about the specific version they use.

Alternatively, you can monitor your TransUnion auto insurance score for free on Credit Karma, along with your credit reports and VantageScore 3.0 scores from TransUnion and Equifax. While your auto insurance scores are not identical to your FICO® Auto Scores, reviewing your credit reports can still provide valuable insights into your auto loan history and help you identify areas for improvement.

Additionally, Credit Karma offers a Drive Score feature, which monitors your driving behaviour and provides feedback on areas such as speed management, safe driving hours, vehicle handling, and focused driving. This can help you improve your driving score and potentially lower your car insurance rates.

How to improve your driving score

Your driving score is based on your performance in three areas: speed, smoothness, and focus. Here are some tips to improve your driving score:

Speed

Keep an eye on your speedometer and watch out for transitions between different speed limits. Speeding is not only against the law but can also increase the likelihood of accidents.

Smoothness

Smooth and progressive acceleration and braking are key to a good driving score. Sudden acceleration can make your vehicle unstable and lead to accidents, especially on poor road surfaces. It also uses more fuel and causes more wear on your tires and engine. When moving from a stationary position, use smooth and accurate movements to accelerate, and slowly work your way up through the gears.

Similarly, harsh braking can lead to accidents and a loss of control of your vehicle. Always keep a good distance from the vehicle in front of you and be mindful of recommended stopping distances. Brake more gently in bad weather conditions, as your stopping distance will increase.

Focus

Minimize phone usage while driving, even with hands-free mode. The safest option is to not use your phone at all when behind the wheel.

Other Tips

• Check your mirrors, blind spots, and surroundings before moving from a stationary position.
• Be extra cautious when accelerating in bad weather, as it could cause your tires to skid.
• Stay aware of your surroundings and look ahead to avoid harsh acceleration when approaching red lights or traffic.
• Always overtake safely and stay within the speed limit.
• Plan your route in advance to avoid rushing and accelerating more quickly.

Frequently asked questions