October 16th, 2012

3 Reasons Not to Fret about Your Insurance Score

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auto insurance score

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

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3 Comments

  1. One more reason not to fret is CURE Auto Insurance. CURE rates primarily based on driving record and does not consider credit score when determining premium rates. CURE is available to responsible drivers in NJ & PA.

    Casey at 6:58 am on November 2, 2012
  2. Insurance companies such as State Farm use the same data but it doesn’t really impact your auto rates, however, it does affect your Homeowners Insurance Rate and the deductible. Insurance Companies use Lexus Nexus and the same unfair driving factors that lower your FICO Score are also used to determine the likelihood that the homeowner will make claims on their homeowners policy. State Farm lost 116% and are canceling 1-2% monthly according to the National Association of Insurance Commissioners.
    While most insurance companies use the past three years to establish whether to insure a potential candidate, State Farm goes back 10+ years and while you may have fallen for the commercial that “Like a good neighbor State Farm is there”, depending on the agent, once State Farm is called to simply determine if some storm damage or any damage for that matter, is covered—–that is reported as a “claim” regardless whether an actual claim was made. Its all legal and just like the lack of control an individual has over the number of “credit inquiries” that are counted as another negative factor when calculating that mysterious FICO Score.
    Good Advise: NEVER INDICATE OR SIGN ANY FORM THAT ALLOWS ANYONE TO CHECK YOUR CREDIT. WHAT YOU BELIEVE IS ONE INQUIRY WILL TURN INTO SEVEN AND THERE IS NOTHING YOU CAN DO ABOUT IT. AS FOR INSURANCE, UNLESS THE DAMAGE IS CATASTROPHIC, FIX IT YOURSELF BUT DONT CLAIM IT. LOOSING YOUR HOME OWNERS INSURANCE WILL FORCE YOU INTO THE STATE’S SYSTEM FOR HIGH RISK CONSUMERS AND WILL COST THREE TIMES AS MUCH.
    ALSO: THE INSURANCE COMPANIES LISTED ON THIS THIS SITE ARE ALL GOOD.

    Richard Guyer at 11:48 pm on March 26, 2013
  3. I worked for many insurance companies in my lifetime, over 26 years in the industry mainly underwriting. That is why this scoring hits me so hard…I remember when the companies in FL had just sent the paperwork around for all of us, the agents to read and begin to have necessary forms signed to cya or in this case, cTa! It bothered me then and never ceased to the point of finally helping me w/my decision to leave my chosen career. The really bad part of it was I did work for State Farm then and had begun w/them when I first entered the insurance field. I had felt so proud to be working for such a respectable company and at the time it was in fact the most respectable company. Ok, that’s not saying a lot especially when we’re talking about Florida anyway, but still it did what it was suppose to do…collect premiums based on certain criteria that had to do w/driving (as far as automobile insurance) and paid covered claims. As the years went by and I grew wiser and a lot more savvy in underwriting as that was usually the field of expertise I found myself working, I saw that the credit reports were being used much as if we were creditors except that we were not giving any lines of credit and there was no reason for us to be looking at the same ‘types’ of entries as they did not pertain to our business endeavors. Well, depends on how ‘endeavors’ is defined…you ‘could’ look at a person that lived beyond his means by maxing out credit as a potential risk for a future claim. Now that is not to say it would be a fraudulent claim, but a claim all the same. Brought upon by stress of financial woes that might make them more careless to their surroundings perhaps by fretting while running through a red light causing an horrific accident. Or maybe, just maybe it ‘could’ be an indication of becoming panicked and perhaps doing what they might not normally do…have an auto come up stolen, only to be found later burnt to a crisp. What good luck! Those heavy loan payments were now over…as the car was paid off and it would be up to the customer what form of transportation to obtain this time around. Insofar as homes went one of the best ‘frauds’ I heard go around was when we would have some storms come through and we’d get tons of calls regarding hail damage (none of which could be 100% proved for any one area), the roofs would have lots of damage from the so called hail, later found to be ‘quarter hail’ as in done by quarters beaten into the roof hundreds of times to resemble hail thudding onto shingles! Ok, that was a true story and that was prior to the credit reviews, those were the good ole’ days, where a crook was a crook was always a crook. But when the credit ‘tool’ came to be everyone became a potential crook and all it took to change ones ways was to over utilize their credit or pay late, etc. Ridiculous! It ticks me off more than many things! I had the unfortunate timing to get this treatment full face several years later. Since I had resigned due to the changing face of the business and my health, I went some 7 years waiting for disability to be approved. I never thought it would ever come to so many years, so many that I sold my townhome when I saw things were going to get much worse before they got any better. With the money I paid off all my debts, loans, etc. Seven years later I had no bad debts just no credit at all. When you have no money you don’t spend on anything! Once I finally got approved for disability the first thing I wanted was a home of my own again and a car that would run. THAT IS WHEN I GOT IT BETWEEN THE uh, the eyes I’ll say…The same company that I had worked for in underwriting and had my personal insurance with over 26 years without claims, paid without incidence, wouldn’t insure me at all. For lack of auto insurance, I knew this one because I had to explain it to clients all the time so I just grinned and found another company that charged me through the nose. After a year of premiums I went back to my ‘old home’ and they gave me a rate, oh boy did they! IT was as much as an 18 year old male with a sports car with tickets would have payed at the time I did the rates! I inquired as to ‘WHAT THE HE….!?” Your credit scores, you scores are so low due to your lack of credit history. I won’t go into the rest of the crap. There are gimmicks and ways to get around some of it but it is still time consuming and goes the way everything else does now by way of the All Mighty Credit Bureaus! It just isn’t right on so many levels. I have had my own condo I put down $14,000 that cost $38,000 in the worst housing mess in our lifetime…I had to get a private mtg due to lack of credit history and begin to build my credit from there, even though I have a bank account w/the same bank I had over 26 years prior and had mortgages with and American Express, etc, etc, always owned and paid off all my home loans and now had to get a secured credit card $100 down w/$500 limit! All my bills are paid directly from my bank account monthly as they have been for the past 3 plus years and even though ‘they’ all can see this and I suppose this new entry w/the courts has got to be the lien on my condo due to the private mortgage I had to take out until I could get credit to get a conventional loan instead of paying 12%, 2 yrs @$254 monthly, all interest! Boy are they making the money! $6k for 2 years for $24,000! Wow! Then when I do the numbers for a housing loan they tell me my debt ratio isn’t right and that I can’t afford a loan!!!! HAHA! What a laugh, I HAVE BEEN AFFORDING IT AND EVERYTHING ELSE FOR THE PAST 3 PLUS YEARS NO HELP FROM ANY OF THE SO CALLED CREDIT ORGANIZATIONS. I fall through the cracks on any of the govt programs because I pay my mortgage on time…and it has not caused a financial problem for me! I have managed to upgrade the condo on my own, furnish, lighting, new electronics and all from my whits and knowing how to stretch a dime to make a dollar. Well enough of my ranting and raving it just felt right. Especially in view of my arch enemy the insurance industry with their pious attitude which is nothing more than a smoke screen for what they do best, as in when the ‘red lined’ neighborhoods due to them being undesirable…same tune, different words. May GOD Bless each of us striving for something better; something FAIR FOR ALL.

    Serena at 4:59 pm on April 27, 2013

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