Auto Insurance Score vs. Credit Score – What You Need To Know | CreditShout

Auto Insurance Score vs. Credit Score – What You Need To Know

By Kevin / May 1, 2011


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Banks, lenders, and credit card issuers aren’t the only ones you should worry about peeking at your credit. Auto insurance companies could be your credit friend or foe because they are also peeking at your credit, in order to determine if you’ll be saving a lot or paying a lot when it comes to auto insurance.

Did you know you have an auto insurance score?

Even if you didn’t know you have it, chances are it is affecting your auto insurance costs. Your auto insurance score derives information from your credit history and credit report to help determine your insurability, i.e. your riskiness to insure and how insurers will price your premiums.

Most insurers in most states use auto insurance scores because studies have shown that there is a correlation between credit behavior and the likelihood of filing a claim. In a nutshell, drivers who have better credit tend to file fewer claims and thus be less risky to insure, and thus have cheaper insurance; conversely, drivers with poorer credit tend to file more claims and are more expensive to insure, and thus have more costly insurance.

Auto Insurance Score vs. Credit Score

The striking similarity between auto insurance scores and credit scores is that they both use formulas based on your credit information. But let’s take a closer look at their differences:

Credit Score

*based on TransUnion Transrisk model

• Represents your creditworthiness – how responsible you are in managing credit and your likelihood of default.

• Calculated only using information on your credit report.

• 3 digit number ranging between 300 and 850; 300 being very poor credit and 850 being perfect credit.

• With a good credit score, you can qualify for excellent rates and offers on mortgages, loans, and credit cards

• With a poor credit score, you may not qualify for credit card or loan offers at all.

Auto Insurance Score

*based on TransUnion’s model

• Represents your insurability – whether you are more or less likely to file a claim that will result in losses for insurers.• Calculated only using information on your credit report (no driving records or past insurance records used).• 3 digit number ranging between 150 and 950; 190 being very poor insurability, and 950 being high insurability.

• With a good auto insurance score, you can qualify for competitive auto insurance rates

• With a poor auto insurance score, you can still qualify for insurance, but at an expensive rate

Many consumers will find that their Auto Insurance Score varies from their credit score. Both score models weigh aspects of your credit report differently, so a factor that carries great weight in your credit score may not do so in your auto insurance score, and vice versa.

What To Do About Your Credit Now

If you are suffering from high insurance rates or think you can get better rates, improving your auto insurance score could significantly help. Now that you know about how auto insurance scores affect you, you can do something about it.

First, check out your Auto Insurance Score truly free at Credit Karma. You can compare your credit standing across other credit score models, including your TransRisk and VantageScore, at the Score Center.

Next, make a game plan to deal with the aspects of your credit that are weighing your score down. At Credit Karma, we list some of the factors that are negatively impacting your auto insurance score. Now you know what your credit situation is, you can better approach how to improve it.

The great part about focusing on improving your auto insurance score is that 1) you can save money on better insurance rates and 2) it will improve your overall credit health. Better credit health means a better credit score and auto insurance score, and down the road, brighter financial opportunities and savings.

Credit Karma™ is a completely free credit management service that provides free credit scores, financial education, and personalized savings recommendations. We help more than 2 million consumers realize the everyday cost savings of having a good credit score.

The editorial content on this page is not provided by any of the companies mentioned and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are the author's alone. Additionally, the opinions of the commenters are not necessarily the opinions of this site

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