October 16th, 2012
3 Reasons Not to Fret about Your Insurance Score
3 Comments |
We’ve talked before about what auto insurance scores are and how they’re used by insurers. But there remains some concern among Credit Karma members, and rightly so. After all, if your auto insurance score is low, you may be concerned that you’ll receive high insurance rates.
Today we’re going to put some of these fears to rest and explain three reasons why you shouldn’t fret about your auto insurance score.
But first, some basics. The auto insurance score you receive on Credit Karma is called the TransUnion Auto Insurance Risk Score. It ranges from 150 to 950 and is calculated using data from your TransUnion credit report. Now, on to a few important points…
It has nothing to do with your driving record.
Picture this: You have a pristine driving record but a poor auto insurance score. Crazy, right? Well, actually, that happens often. Since your insurance score is based solely on your credit data, it has nothing to do with your driving record. That factor doesn’t even come into play in this score. What’s more, it doesn’t even matter if you don’t have a car; you can still have an auto insurance score.
It’s just one of many factors used to determine insurance rates.
This is one of the most important things to remember. Currently, you insurance rates can’t and won’t be based solely on this one three-digit score. Auto insurers use lots of factors when setting your rate, including your driving record and market demographics like age and gender. All of these contribute to assessing the risk of insuring you as a driver, not just a three-digit score.
Your rate won’t necessarily change due to a credit blunder.
Just because you go through a difficult time that ruins your credit—think bankruptcy or foreclosure—that doesn’t mean your insurance rates will suffer. In fact, it’s illegal for insurers to change your rates strictly based on credit information. That’s according to the National Conference of Insurance Legislators Model Act.
Bottom Line: If you have a good driving record and you’re happy with your current insurance rates, chances are you have nothing to worry about when it comes to your insurance score. It’s interesting to see how this one risk indicator changes based on your credit, but it shouldn’t be your main focus.
Something else to consider is that your good credit and driving record could actually get you lower interest rates than you’re paying right now. Check your savings to see if you’re overpaying on insurance.
Have a Karmic day!
Bethy, Social Media Maven
Follow Credit Karma!