Understanding Insurance Credit Scoring

It is difficult for the average consumer to figure out precisely how insurance credit scoring works. Insurance companies must disclose what factors they consider but they do not have to disclose how much weight each factor has toward the final score and price. Much of the information used by many insurance companies comes from your standard credit reports. The insurance company analyzes the data in your credit report along with a variety of other factors to calculate your insurance score. Many consumers wonder why credit history is used in determining insurance rates. Insurance company research shows a correlation between financial responsibility and responsibility behind the wheel. By incorporating the results of credit score algorithms into their insurance risk algorithms, the insurance company works to decrease their risk.

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Much like the way personal bankers understand the filing process but not the calculation that determines a borrowers risk, insurance agents and brokers do not specifically know how each company weighs different risk factors. Agents and brokers do not worry about the exact risk calculations, but they know how to give their client the best policy and service. If you need insurance for bad credit then agents and brokers will know the companies that do not consider credit as a risk factor. Agents and brokers also know what companies cover high risk drivers and those that were previously denied.