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: Apr 16, 2019

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Auto insurance premiums are based on risk and much like credit card companies use a credit score to determine your eligibility for credit, auto insurance companies do the same.

The difference is that auto insurance companies use what is known as an “insurance score”.

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An insurance score is very similar to a consumer credit report, using the same FICO based reporting as Equifax, Transunion and Experian.

However instead of analyzing your credit profile for the risk of being delinquent on a loan auto insurance companies try to forecast the likelihood of you filing a future claim.

How is your auto insurance score calculated?

This is almost like asking for the secret formula to Coca-Cola as the exact formula for calculating insurance scores or credit scores is not public.

How insurance scores work is they provide a set of data based on accepted credit scoring principals which auto insurance companies then add to their own unique formula for calculating risk.

Not all auto insurance companies use the same insurance score and they certainly do not all apply the information in the same way.

At the end of the day insuring any individual is about calculating the potential risk of the applicant filing a future claim.

While your credit and payment history certainly do play a role in the chances of you filing a future claim there are many other variables including your prior claims history, accident history and more which are all used to determine the cost of auto insurance. Auto insurance scores provide just one insight into your risk profile.

Why is my credit score important to auto insurance companies?

You would think that how you pay your MasterCard or Visa bill has no relevance to auto insurance but it really does. The cost of auto insurance is not just about your driving record but also tied to the likelihood of an insurance company having to pay a future claim.

Drivers with poor credit have been proven to file more claims than drivers with good credit. This could be due to more limited options when a vehicle a damaged, less access to credit or any number of factors.

Although the purpose of auto insurance is to cover vehicle damage in a car accident a lot of drivers still avoid filing a claim if the damages are low enough, however drivers with poor credit (as a group) statistically file a larger number of claims, hence the higher risk.

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How can I improve my auto insurance score?

This is hard to say but auto insurance scores are FICO based and if you pay your bills on time then your score should increase.

The formula is essentially the same as your consumer credit score so reducing your debt or improving your payment history can all positively affect your auto insurance score over time.

Do all auto insurance companies use insurance scores?

No, but most of the well-known brands do. Some states have laws which prevent auto insurance companies from using your credit score as a factor in calculating premiums but we both know they will find some way around this.

For most drivers credit is never an issue but if you do find yourself continually denied coverage then there are specialty providers who provide no credit check car insurance.

You can always expect to pay more with these auto insurance companies so it’s best to pull a copy of your credit report and make sure to correct any discrepancies before buying coverage.

How much is auto insurance with a bad insurance score?

The formula for calculating the cost of auto insurance differs from one provider to another. Some auto insurance companies put a lot less weight on your insurance score than your actual driving record.

The cost of auto insurance for anyone with a higher risk profile than typical good drivers is very hard to estimate. This is why you need to shop around and compare auto insurance quotes and multiple providers.

Use our FREE quote tool to compare auto insurance rates today!

Related posts:

  1. Do auto insurance companies check credit?
  2. How much is no credit check auto insurance?
  3. How to File a Car Insurance Claim
  4. Who is a Good Driver?