Car insurance companies use car insurance scores, also called credit-based insurance scores, to determine their insurance rates.
Next, we will delve into what car insurance scores are, what role credit scores play and how you can improve them.
What is a car insurance score?
Auto insurance scores They are created by insurers to measure the likelihood of you having an accident or completing a claim. Insurers obtain information from credit reports and their insurance claims history to calculate these scores. Auto insurance scores are one of the factors used to determine your car insurance rates.
All US states UU.except Hawaii, California and Massachusetts—Conside your credit score when determining your car insurance rates
What is the difference between auto insurance scores and credit scores?
Credit scores They are based on the information in your credit report and are used to determine the likelihood of reimbursing your credit accounts on time. Specifically, credit scores inform decisions regarding things like interest rates, repayment periods and loan amounts.
Auto insurance scores further use your credit score information, although they may not use all the information and can be calculated differently.
How do auto insurance scores affect my rates?
Typically, having a higher insurance score and a positive driving record will result in a lower insurance rate, similar to how a higher credit score will result in a lower interest rate.
However, these are not the only factors used to determine insurance rates. For example, someone with a high insurance score, but a poor driving record may still have a high rate. Not all insurance companies use the car insurance score, but most consider the factors used to calculate car insurance scores when determining rates.
Car insurance companies have discovered that drivers with low credit scores tend to file more claims, an observation that has since been backed by a Report of the Federal Trade Commission.
Each insurance company has its own approach to calculate insurance scores, so you can see that the score varies between companies.
the Zebra car insurance status 2019 The report found that drivers with bad credit generally pay more than double for car insurance compared to those with exceptional credit. The report also found that you can save 17 percent on your insurance rating when you increase your credit score by one level.
How can I improve my insurance scores?
You can improve your auto insurance scores the same way you would improve your credit score. Here are some ways you can achieve a good insurance score and a good credit score:
Eliminating errors from your credit report is an important way to improve your credit score and, in turn, your auto insurance score. Be sure to check your credit report regularly for errors: you can obtain a free copy per year of your credit report from each of the credit bureaus through Annual Credit Report.com.
Lexington Law credit counselors can help you review your credit report and learn what you should do to clear the errors found in your credit report to ensure that your information is reported fairly and accurately. Contact us today to learn how credit repair can help you reach your credit goals.