Auto insurance companies use various factors when calculating your premium. Those factors include everything from the type of car to your age, ZIP code and driving record.
In addition, auto insurance companies pull your credit record (in states that allow it) and your insurance score.
Never heard of an auto insurance score? You’re not alone. An auto insurance score combines credit report information with your claim and accident history. The combination gives car insurance companies an indicator of how likely you’re to file a claim.
Keep reading to learn everything you need about auto insurance scores and how they can impact insurance premiums.
What is an auto insurance score?
In most states, the Department of Motor Vehicles (DMV) keeps track of your traffic violations and accidents using a point system.
What winds up on your DMV record?
- Speeding tickets
- Accidents
- Driving infractions
- Points associated with tickets
Your license can be suspended or revoked if you reach a certain points threshold. The point threshold varies by state.
Like the DMV, car insurance companies have their own point system that they apply to their policyholders. In most cases, each auto insurance company has its own proprietary system, so points vary by insurer. Auto insurance companies assign points to your insurance score for speeding tickets and other traffic violations, but they also hand out points for any accidents that result in a claim.
There are repercussions if you hit a specific point threshold on your auto insurance score. Your auto insurance premium will be “surcharged,” which means you pay higher car insurance premiums until the points drop off. Your auto insurance company could cancel coverage if your point total gets too high.
What goes into an insurance score?
Auto insurance scores are often proprietary, and it’s difficult to nail down every factor car insurance companies consider. There are some basic components of an insurance score that most insurance companies use.
The main factors comprising an auto insurance score are your credit report and insurance history. The insurance history includes claims and may also consider information from policyholders that have similar characteristics to you.
Here are just a few factors from your credit report that go into your auto insurance score:
- Payment history
- Amounts owed
- Length of credit history
- Credit mix
- New credit inquiries
In addition to your credit score information, insurers also review your insurance history, which includes factors such as:
- Your accident history, including at-fault accidents
- Insurance claim history
Some insurers purchase insurance scores from FICO, LexisNexis or TransUnion instead of using a proprietary system. FICO uses the following factors to calculate insurance scores:
- Payment history (40%)
- Outstanding debt (30%)
- Length of credit history (15%)
- Pursuit of new credit (10%)
- A mix of credit experience (5%)
How does an insurance score affect your auto insurance rate?
Insurers use insurance scores to help determine your risk and the likelihood of future claims and losses. An insurance company must charge enough premiums to cover losses from claims and their business expenses while also turning a profit.
Your auto insurance score and other factors determine your premium.
- You should qualify for the best rates if your score falls into the “good” category.
- A poor score results in higher car insurance rates.
However, your score isn’t the only factor insurers consider, so a low credit score doesn’t necessarily translate into a sky-high premium.
How is an auto insurance score different from a credit score?
Insurance scores pull data from the same sources, but they’re not identical to a credit score.
Credit scores are used to assess your ability to repay a loan. While they look at how promptly you pay your bills, they also consider additional factors, such as your job history and debt-to-income ratio. They want to ensure you have the financial means to repay the loan.
On the other hand, auto insurance scores focus more on how you deal with your finances and accounts than how much you can afford. They consider the length of your credit history, if you pay on time and how much of your credit you use.
In addition, your insurance score considers your claim history, which your credit score doesn’t include.
Neither a credit score nor an insurance score can consider your personal information. The following can’t be included:
- Race, color, national origin
- Religion
- Gender
- Marital status
- Age
- Income, occupation or employment history
- Location of residence
How does credit history affect auto insurance scores?
While a credit-based insurance score differs from a credit score, they use much of the same data, and your credit score impacts your insurance score.
Your credit score helps creditors determine the likelihood that you’ll be late on a payment or default on a loan. Insurers use insurance scores to calculate how likely you’ll file a claim.
Auto insurance companies say your credit score can help predict your risk. Studies have shown a correlation between credit history and insurance claims. People with lower credit scores tend to have more accidents and file more claims than people with higher scores.
An insurance company often pulls your credit history when determining a premium. A credit-based insurance score considers many of the same factors that your credit score ranks, so your credit score impacts your insurance score.
In fact, according to a rate analysis done by CarInsurance.com:
- On average, drivers with poor credit pay 71% more (about $1,000 more annually) for a full coverage policy than drivers with good credit.
- On average, drivers with fair credit pay an 18% higher rate than those with good credit.
However, your credit isn’t the only factor that insurers consider when gauging auto insurance rates. So, don’t panic if you have poor credit.
States with credit score restrictions
In most states, insurers are prohibited from making coverage and premium decisions based solely on your credit score. Some states go even further.
Insurers in these states are prohibited or severely restricted from using credit scores or credit-based car insurance scores when setting a premium:
- California
- Hawaii
- Maryland
- Massachusetts
- Michigan
- Oregon
- Utah
What is a good insurance score?
Many insurers keep their insurance score information proprietary. However, the ratings are public information if they use an insurance score from FICO or one of the other major credit reporting agencies.
Here are the score ranges for three credit reporting agencies:
- FICO: Scores range from 250 to 900 – A good score is anything above 700, while anything between 250 and 500 is considered poor.
- LexisNexis: Scores range from 300 to 950 – A good score is anything above 776, and poor scores fall between 200 and 500.
- TransUnion: Scores range from 150 to 900 – A good score is anything above 776, and poor scores range from 150-500.
How to find your auto insurance score
If your insurer uses a proprietary insurance score system, you may not be able to see their particular score, but it never hurts to ask.
Some car insurance companies may be happy to share your insurance score with you, while others keep the information proprietary.
However, you can pull your LexisNexis report, including your credit and insurance scores. Many car insurance companies purchase their insurance scores from LexisNexis.
You can request a report at https://consumer.risk.lexisnexis.com/
How to improve your auto insurance score
You can improve your insurance score, but it takes time and effort.
Since a good portion of the insurance score may be based on your credit rating, much of the advice is the same. Here are a few tips for improving the credit portion of your insurance score:
- Pay bills on time, including mortgage, credit cards, car loans and other loan payments.
- Pay off credit cards monthly or keep balances low if you can’t afford to pay them monthly.
- Use your credit to help build your credit history but make all payments on time.
- Shoot for a mix of credit vehicles, credit cards, loans, mortgages, etc.
- Don’t apply for new credit cards unless absolutely necessary if you’re working to improve your score.
- Keep your credit utilization low if possible. This refers to the percentage of your available credit that you are using. If your credit card has a limit of $5,000 and your balance is $3,750, you are 75% utilized. A lower utilization rate results in a better insurance score.
Your insurance score also includes your claim history, so keep it clean. While a claim will be necessary if you’re involved in a car crash, consider paying for more minor issues out of pocket to keep your claim history clean.
When you’re out on the road, always drive safely, follow traffic laws and avoid speeding tickets. If possible, garage your vehicle, which can help prevent accidents and damage caused by weather and even animals. The fewer claims you have on your insurance record, the lower your premium.
If you improve your credit score and stay claim-free for a few years, you should see your insurance score improve, which leads to lower car insurance rates.
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Laura Longero
Executive Editor
Laura Longero is an insurance expert and Executive Editor at CarInsurance.com, where she specializes in helping consumers navigate the complexities of the financial and insurance industries. She has 15 years of experience educating people about finance and car insurance. Prior to joining CarInsurance.com, she worked as a reporter and editor at the USA Today Network. Her expertise provides readers with practical guidance, helping them make informed choices about their financial and insurance needs.
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John McCormick
Editorial Director
John is the editorial director for CarInsurance.com, Insurance.com and Insure.com. Before joining QuinStreet, John was a deputy editor at The Wall Street Journal and had been an editor and reporter at a number of other media outlets where he covered insurance, personal finance, and technology.
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Leslie Kasperowicz
Executive Editor
Leslie Kasperowicz is an insurance educator and content creation professional with nearly two decades of experience first directly in the insurance industry at Farmers Insurance and then as a writer, researcher, and educator for insurance shoppers writing for sites like ExpertInsuranceReviews.com and InsuranceHotline.com and managing content, now at CarInsurance.com.
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Nupur Gambhir
Managing Editor
Nupur Gambhir is a content editor and licensed life, health, and disability insurance expert. She has extensive experience bringing brands to life and has built award-nominated campaigns for travel and tech. Her insurance expertise has been featured in Bloomberg News, Forbes Advisor, CNET, Fortune, Slate, Real Simple, Lifehacker, The Financial Gym, and the end-of-life planning service.