Most insurance companies use many factors to price your insurance. They include your driving record, claims history, the type of home or vehicle you own and, in some states, your credit-based insurance score.
What is a Credit-Based Insurance Score and Why Does it Matter?
Your credit-based insurance score is not the same as your personal credit score, nor is it a measure of your credit worthiness. The credit-based insurance score is a number that measures your likelihood of having an insurance claim. Studies have shown that consumers with higher credit-based insurance scores have fewer and less severe losses. For this reason the credit-based insurance score is useful as a rating factor, but in those states where it is used, it is only one of many that are used.
Because your personal credit history affects your credit-based insurance scores, it is important to regularly review it and make sure it's accurate. The Fair Credit Reporting Act (FCRA) allows you to order one report for free from each of the major credit reporting agencies each year. You may also purchase a 3-in-1 report to review your scores from all three major credit bureaus - Equifax, Experian and TransUnion.
Credit Rules Vary by State
Most states have rules about how credit information can be used in insurance. Contact your state's Department of Insurance for the latest information on your state's rules.
Credit Report Errors
If your credit record is incomplete or has an error, ask the credit reporting bureau to make the corrections.
Credit-Based Insurance Scores - What?!
Written by Sullivan Insurance Agency on Feb 4, 2015