Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Laura Walker graduated college with a BS in Criminal Justice with a minor in Political Science. She married her husband and began working in the family insurance business in 2005. She became a licensed agent and wrote P&C business focusing on personal lines insurance. Laura serviced existing business and wrote new business. She now uses her insurance background to help educate drivers about...

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Reviewed by Laura Walker
Licensed Agent for 10 Years

UPDATED: Jan 10, 2020

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Credit scores play a big role in car insurance rates and a bad credit score can often lead to much higher premiums or even denial of coverage. However, credit scores for car insurance are not the same as your credit score when applying for typical credit such as a credit card or car loan.

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What credit score do car insurance companies use?

Although the credit score used by car insurance companies is not the same as your typical score it still is calculated using the same scale (350–850) and takes into consideration many of the same items on your credit report.

While lenders of typical financial products usually pull a beacon score (Equifax), Transunion or Experian score (or all 3) insurance companies heavily rely on what’s known as the insurance score.

The insurance score is defined by each of the three main credit bureaus as:

  • InScore® (Equifax)
  • Fair Isaac Insurance Risk Score® (TransUnion)
  • Experian/Fair Isaac Insurance Score (Experian)

This insurance score is what car insurance companies use in conjunction with other information, such as prior claims history and your driving record, to determine a risk level for your application.

The cumulative risk score you achieve will play the ultimate role in how much car insurance will cost and whether or not the insurance company will extend coverage.

Will my insurance score change?

Of course. The insurance score (much like your credit report score) is only a reflection of a particular point in time and may improve or decline depending on the future data in your credit report and the formula used to calculate the score.

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Why do car insurance companies use credit scores?

Statistics show that people with poor credit are more likely to file claims and since all insurance companies have a business model based on making a profit they use as much resources as they can to measure such risk.

While credit scores certainly do not play a factor in how well you drive they do provide empirical evidence of the likelihood of future claims as a group. While at first this may seem like an intrusion of privacy it’s really a logical conclusion.

People with poor credit often have less financial means and if filing even a small claim means getting their vehicle fixed they essentially have no choice but to file a claim. People with greater means and access to credit (better credit) will more likely find a way to pay the damage out of pocket for smaller claims and avoid the risk of higher auto insurance rates in the future.

Do all car insurance companies use credit scores?

No, although most of the well-known brands do. Car insurance companies who do not use credit scores are usually either (a) insurers who specialize in high-risk insurance or (b) restricted by state laws. Some states have banned the use of credit scores in profiling car insurance applicants such as California.

The use of credit scores for car insurance is on ongoing debate between consumers who feel like their privacy is being invaded and car insurance companies who simply want to use another tool for minimizing risk.

At the moment however the car insurance companies are winning and while most consumers will never have a problem with a credit score affecting their rates consumers who have come upon hard times may just get another blow when it comes to obtaining or renewing an auto insurance policy.

If your credit score is causing continued denial by many of your preferred car insurance companies then contact your state department of insurance for a list of providers who specialize in non-standard car insurance coverage or view our high-risk auto insurance section to learn more about some of your options.

Compare insurance quotes with our FREE quote tool by entering your ZIP code today!

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