Insurance Credit Score

Have you ever heard of an “insurance credit score?”

If you haven’t, know that there are credit scores tailored especially for insurance companies to determine your propensity to file an insurance claim.

Put simply, when you file an insurance claim, it cuts into the profit insurance companies make from charging you all those insurance premiums.

So they don’t want you to file insurance claims, but if you do, they want you to pay a, ahem, premium, for doing so.

This differs from traditional credit scores, which measure the probability of you defaulting on a credit line.

Bad Insurance Credit Score = More Insurance Claims

Spoiler alert: Insurers discovered that those with bad credit scores tend to file more insurance claims, and thus are charged higher rates.

Meanwhile, those with good credit scores tend to take better care of their car, home, and other belongings, and thus file fewer claims and enjoy lower insurance rates.

This whole business is being contested nationwide because opponents of the insurance credit score feel it unnecessarily picks on those with poor credit.

But proponents say most consumers have good credit scores, and thus will benefit from the lower associated insurance rates.

3 Insurance Credit Scores

Just like there are 3 credit scores, each of the major credit reporting agencies has an insurance credit score.

Equifax – InScore®
Experian – Experian/Fair Isaac Insurance Score
TransUnion – Fair Isaac Insurance Risk Score®

And just like traditional credit scores, they are based on the almighty Fico score, though the credit score scale is likely different than other industry scores.

Do insurance credit scores matter?

But not all insurance companies use insurance credit scores, and some even have their own proprietary credit scoring models they rely upon.

And as previously mentioned, their usage is still under fire, though they will most likely prevail as a ratings factor.

In any case, this is just another reason to stay on top of your credit to save a little more money each month.

Tip: How to improve your credit score.