June 19th, 2012

What’s Up With My Auto Insurance Score?

205 Comments | Twitter | |

 

auto insurance score

There’s a lot of confusion surrounding auto insurance scores, and it’s understandable. Why would your insurance premiums be based on your credit history, something that’s completely unrelated to your driving history? Today we’ll try our best to clear up the confusion.

What is an auto insurance score?

The auto insurance score—also called a credit-based insurance score—is a three-digit number meant to predict the likelihood that you’ll file an insurance claim. The auto insurance score you receive on Credit Karma ranges from 150 to 950, and it’s calculated using data from your TransUnion credit report. However, it is not the same thing as a credit score. Also, it has nothing to do with your driving record.

As these scores came into wide use, the National Conference of Insurance Legislators (NCOIL) Model Act started regulating the use of credit information by insurers in 2007.

Who uses it?

These scores have become more prevalent in the past several years. They’re used by the 15 largest auto insurers, including Allstate, GEICO, Nationwide, Progressive, StateFarm and USAA. The scores can vary from company to company, as different factors are used and weighted in their creation.

How does my credit affect my insurance rates?

While most auto insurers use credit information to help set your premium, they also use other factors, including your driving record and market demographics. In fact, the NCOIL Model Act prohibits insurers from amending or setting your rates based solely on your credit profile.

For instance, if you currently have a good insurance premium, you shouldn’t worry about your insurance costs suddenly skyrocketing due to a recent credit blunder. That’s restricted by the NCOIL Model Act.

It’s also important to note that these scores are not used to predict whether or not you’ll pay your premium; they’re meant to predict whether or not you’ll file an insurance claim. In other words, they attempt to estimate future losses to the insurance company instead of your future payment behavior.

The good news is that you can benefit from a good insurance score coupled with a good driving record. You could qualify for a lower rate than you would get based solely on your driving record.

Are insurance scores fair?

It might seem strange that your credit history can be used at all in setting insurance premiums, but there are reports to back it up. A 2007 FTC study found that these insurance scores are effective predictors of risk.

However, there are opponents to the credit-based insurance score. One 2005 study suggests that this method of setting insurance premiums “has a disproportionate impact on consumers in poor and minority communities.”

What if I don’t want my insurance company using my credit?

Whether or not this practice is fair is still up for debate. But the Fair Credit Reporting Act allows for the use of credit information by insurance companies.

If you’re worried about your credit negatively affecting your insurance rates, check with your insurance company to see if it uses credit information. Most large, countrywide companies do, but you may find a smaller, regional insurance provider that doesn’t.

Bottom Line:

If you’re already with an insurance company that uses credit to help set premiums, know that your rate won’t change because your insurer suddenly decides to recheck your credit. In fact, if an insurance company denies you coverage or increases your rates based on information in your credit report, you have rights. Read this American Insurance Association brochure for more information. It’s also important to remember that you could receive lower rates if you have a good insurance score and great driving record.

Have more questions? Find out if they’ve already been answered in our Credit Advice Center.

is the Social Media Manager and Writer at Credit Karma.

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Disclaimer: All information posted to this site was accurate at the time of its initial publication. Efforts have been made to keep the content up to date and accurate. However, Credit Karma does not make any guarantees about the accuracy or completeness of the information provided. For complete details of any products mentioned, visit bank or issuer website.

205 Comments

  1. How do you improve this score???

    Evelyn at 2:39 pm on February 28, 2013
  2. I would also like to know the answer to Evelyn’s question. My auto insurance score is “Poor,” but my credit is excellent. I’ve gotten two speeding tickets in the last 6 years and one was dismissed (I’m waiting on the outcome of the second). That doesn’t strike me as particularly egregious. I’ve not found much on this site to indicate how to raise my Auto Insurance Score except for keeping my credit score high, which I’m already doing.

    SMB at 10:13 am on March 1, 2013
  3. Jenna

    Hi Sharyl and Evelyn! The auto insurance score uses some of the factors of traditional credit scores, so most good credit behavior should help the auto insurance score. I’d also recommend checking out our Credit Advice Center. Chances are someone else in the Credit Karma community has faced the same issue you have, or has posed a similar question in our online community. If not, don’t be afraid to make your voice heard! Post your own question for others to answer.

    Jenna at 11:04 am on March 1, 2013
  4. Basing your insurance rates on whether you have good or bad credit is BS. How do they determine your risk in filing a claim? I have a spotless driving record, can’t remember when I ever filed a claim w/my insurance, that’s how long it’s been. I have stuff on my credit report that were situations basically out of my control yet I have a “poor” insurable rating? Based on what? The fact that I don’t have a single blemish on my driving record, not even a parking ticket, and I haven’t filed any claims w/my insurance agent. Yeah, sounds like a completely fair system they have working there!

    Soxie at 1:43 am on March 2, 2013
  5. I also have no claims and no at fault accidents but I have poor credit and therefor a poor auto ins rating. My score is 720 which is high on the scale. But still, my rating is poor. It is my belief that this is just one more way to charge more and have a confusing or complicated “research” orientated reason to do so.

    Bil at 9:12 am on March 6, 2013
  6. I just became aware that my insurance score dropped by 33 points somtime in the last 9 months, at the same time my credit score was improving. Why would this happen? How do I get it reviewed and corrected?

    Gerald at 8:01 am on March 8, 2013
  7. I, too am confused about the insurance score. A year ago I was involved in an accident and it was my fault. I switched insurance companies 6 months ago and my credit report and score isn’t the greatest. It’s actually Fair. My insurance score (according to CK) is great. I’m higher than 71% of users. I don’t get it.

    Louis at 3:33 pm on March 8, 2013
  8. I don’t drive, nor own a car. My car score is 801 and says poor? why. I haven’t owned a car in over 10 years. When I did, I had great insurance, great driving record, and 1 accident that was not my fault; no speeding tickets, etc. So how since I won’t ever own another car or drive again can I improve my score? My regular credit score is good/very good working on getting it great. Anyone able to help answer my question out there?

    Cindy Ledbetter at 2:46 pm on March 9, 2013
  9. My credit score dropped the same time I downloaded this App. I had an exelent credit score and now it’s only poor, I think they lower your score after downloading the app.

    Thomas at 8:02 am on March 10, 2013
  10. Jenna

    Thomas, using Credit Karma doesn’t impact your score. We’re making the credit score request on your behalf (known as a soft inquiry), and those types of inquiries aren’t shown to creditors. They don’t affect your credit at all.

    Jenna at 1:07 pm on March 12, 2013
  11. Every weekend i used to pay a visit this site, for the reason that i want enjoyment, for the reason that this this website conations truly good funny stuff too.|

    how much does auto insurance cost at 6:48 pm on March 13, 2013
  12. I worked in the auto insurance industry for over 35 years. Insurance company employees NEVER know what your insurance score is…it is typically obtained from FICO, a data vendor, used by the insurance company, and then deleted, not stored, by the company. It may be obtained before a policy in renewed, evaluated, used, and again, deleted.

    SMB wrote that his credit is good, but has some speeding tickets. These, like accidents, will affect the insurance score.

    Many folks carry the state mandated minimum limits of liability coverage. For some reason, similar to credit history, the limit of liability coverage carried, reveals that drivers carrying HIGHER liability limits, have fewer and less costly accidents. If your policy is only for the minimum required by law, you’re doing yourself a disservice. Increasing the limit from the minimum to the next level available, is not that expensive and may increase your insurance score, resulting in lower premiums.
    If increasing one level doesn’t work, go up another one. Your agent can do this for you…call him/her, and ask them to quote you what the next level of liability for you would be, and he/she can tell you that, along with what the additional cost would be. Agents get paid from the premium you pay, give ‘em the chance to earn it.

    Dan at 6:44 am on March 18, 2013
  13. I see all the questions they seem to be the same as mine, perfect credit great driving record etc, where are the answers to why is my rating high and poor?Where do you get an answer

    Linda Hammond at 10:20 am on March 19, 2013
  14. Does anyone know why I would have an Auto Insurance Score when I have never owned (or rented) a vehicle, driven or been in an accident?

    Ron at 2:22 pm on March 26, 2013
  15. Jenna

    The Auto Insurance Score is calculated based on information on your credit report. It does not include information like your driving record, whether or not you drive at all, or whether you own a car. You can read more in the above article.

    Jenna at 2:28 pm on March 26, 2013
  16. My insurance score is 786! I’ve been driving for 35 years and owned my home for 19 years. In that period there have been no tickets, accidents or insurance claims. This doesnt make sense and I find it appalling that they put a score on us based on “PREDICTIONS” that are totally inaccurate historically.

    Don at 3:30 pm on April 3, 2013
  17. Basing a decision on ones insurance rates based on a credit score is posperous and discrimative. It has nothing to do with ones driving record. We should file a class action suite in this subject and have this process removed.

    Duane smith at 6:45 pm on April 4, 2013
  18. Total BS. Just a way to get more money from consumers. Total Fraud!!!!!!

    Rick at 1:39 am on April 5, 2013
  19. This is in reguards to almost everyone question. People are asking why their credit scores are high and the insurance scores are low? The lower your insurance score the better that means that you are less likely to file a claim and insurance companies like that. If your insurance score is getting lower that’s good to because it usually means that your credit score is getting higher.

    Roxann at 10:44 am on April 5, 2013
  20. Okay. So I’ve read thru all this thread. I have excellent credit scores. I have NO blemish on my driving record. I buy mid to top range for all insurance coverages. The only thing I can possibly imagine might be that I’m 66 years old. Why is my insurance risk rated as poor???????

    Sandra McCausland at 2:23 pm on April 5, 2013
  21. How can I have a bad score when I haven’t any accidents and premiums are paid on time. I have been with this company for 27 years.

    Karen Stotts at 8:25 am on April 7, 2013
  22. In the nearly two years I’ve been using this site, my auto insurance score changed once. How they calculate this score is a mystery, but it doesn’t appear to change as much as the other scores do.

    They may use a tiered system where no changes are shown until you meet the next levels requirements, but that seems strange to me as none of the other scores do this. Even the Home Insurance score has minor fluctuations every month.

    What’s even better is my score went up after making my one and only insurance claim (someone else did a hit and run on my poor bumper). One would think that would have a negative effect on this score.

    It would be nice to know how to improve this score, but credit scoring is a shady practice to begin with and it appears they enjoy keeping it that way.

    His Noodliness at 6:26 am on May 2, 2013
  23. Jenna

    Sorry for the confusion. We actually don’t calculate any of the scores on Credit Karma– we pull all four scores (TransRisk, TransUnion New Account, Auto, and Home Insurance) directly from TransUnion. It’s for this reason that we decided to write this post- to shed a little light on this score. Hope that helps!

    Jenna at 10:28 am on May 2, 2013
  24. The insurance score is proportional to your credit score and not your driving history.

    Kevin Skurski at 8:56 pm on June 2, 2013
  25. People should keep in mind that some states don’t allow the use of insurance scores and some auto insurance providers don’t actually use credit scores. These things vary, so it’s important to check your state insurance commission’s website or your auto insurance provider’s for all the facts.

    Joshua Squires at 7:37 am on July 5, 2013
  26. Also remember, if the insurance companies could not somehow increase revenue, they wouldn’t use your credit information. There is a direct cause and effect between using your credit report to justify raising your rates and company revenues.

    dave at 7:04 pm on August 28, 2013
  27. Agree with kavin that some states don’t allow the use of insurance scores and some auto insurance providers don’t actually use credit scores. So i always use local comparison system and want to suggest that please read T&C carefully before taking any policy.

    jasleen at 9:31 pm on September 9, 2013
  28. I will be petitioning this with the White House to get rid of these scores since they are all flawed and it is just another way of scaming people out of their money by the insurance companies. Click on the link below and sign the petition to get rid of these scores!

    https://petitions.whitehouse.gov/petition/outlaw-use-insurance-scores-due-enormous-errors-and-fraudulant-practices-insurance-companies/rN77pfpx

    Dan B at 8:10 am on September 17, 2013
  29. Hi, I am shocked to know my auto insurance credit score is very poor, my over all credit is fair, I am using very little credit less than 5%. I have had no accidents in past, I have always paid my bills on time, still my score is very poor, I had an auto insurance policy jointly with a friend of mine where in my friend had an accident, does that cause a problem

    vikrant at 11:05 pm on October 5, 2013
  30. ” This is in reguards to almost everyone question. People are asking why their credit scores are high and the insurance scores are low? The lower your insurance score the better that means that you are less likely to file a claim and insurance companies like that. If your insurance score is getting lower that’s good to because it usually means that your credit score is getting higher.”

    So this was posted on April 13 2013 and actually makes alot of sense. The confusion isn’t about what the score is, the confusion is centered around the Credit Karam UI if this is in fact the case the scale on this page of the dashboard needs to be inverted. It indicates poor for good ratings and good for bad ratings. This needs to be addressed by Credit Karma and it’s a stupid simple fix that would eliminate a call driver.

    Luke Hebert at 10:44 am on October 19, 2013
  31. I haven’t had a traffic violation in 25 years. I haven’t submitted an auto insurance claim in over 25 years, either. I have always paid my auto insurance and car payments on time. I have never been late. Why is my auto insurance score “poor”???

    vickiek at 12:48 pm on November 4, 2013
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    Catherine Hicks Nude at 2:01 pm on December 7, 2013
  33. Yeah I have an issue with this score. I’ve been driving for 20 years, and I’ve never filed a claim, have only been in two accidents that were the fault of negligent drivers. To say that I have a “poor” score here, or that I’m “more likely to file a claim” is ludicrous. If you were to see my vehicles, and how I take care of them, you’d think I was a freak. One of my vehicles is a daily driver that I drive year round and turns heads in car shows!!! I’m actually offended by this.

    Jerry at 1:56 am on January 1, 2014
  34. I’m kind of perplexed as well. Last year in June my Auto score was poor and rated at 667. However it jumped up to 810 in July, which is still considered poor. However my auto insurance dropped by 150 dollars per 6 month period so apparently this score makes a huge difference. The only thing that I had done was increase my insurance coverage. So since I increased my coverage my rates dropped because my score jumped. At least that’s how I’m reading into it.

    Aaron at 10:20 am on January 3, 2014
  35. This is a total scam to allow insurers justification for raising rates and therefore profits. My credit score is better than 70% of everyone, but my insurance score is worse than 60%. Sure. With no negative info whatsoever.

    Watch anything on tv and think about why every third commercial is a duck/gecko/pig/mayhem/flo/aaronrodgers trying to sell you car insurance. How can they afford to spend that much on advertising if they aren’t making insane amounts of money? Nationwide isn’t on your side. You are not in good hands.

    Josh at 9:44 pm on January 14, 2014
  36. A lot of insurers do not use credit score when determining rates. You just need to find one that doesn’t (if you’re that worries about it).
    Also, the credit score is just a small part of the total algorithm.

    James at 10:48 pm on January 19, 2014
  37. I’m going to 2nd the comment by Luke Hebert above.

    My regular credit score is borderline Good/Excellent. But my auto insurance score is just on the side of “Very Poor”. Furthermore, I just got a new credit card (0%, for dental stuff) – which lowered all of my scores -except- for the auto insurance score, which went UP.

    CreditKarma – Your UI is reversed!

    Bill C. at 3:03 pm on February 4, 2014
  38. I now have a Poor score. Credit has been Excellent year over year for a decade +. I did file a home insurance claim to cover damage in the recent ice storm. Maybe this caused by 56pt drop. Interestingly, my home insurance score went up. Love useless metrics…

    Slee at 3:29 pm on February 21, 2014
  39. Still nothing is said about *what* “information” it uses “from the credit report,” or explain how this would possibly increase or decrease the chance of filing a claim. Many people have very positive credit reports and high credit scores but low insurance scores. I have a low-to-average credit score (depending on which one you consider “the real one”), and an insurance score of 640, according to Credit Karma. I’ve not filed an insurance claim in the past 12 years, and that was an Uninsured Motorist claim from a not-at-fault accident. What the insurance companies are telling us is that if I have bad credit due to a layoff and bankruptcy, there’s a higher chance of some idiot without car insurance running into me.
    It is completely asinine.

    Mark at 1:08 pm on March 20, 2014
  40. For the past couple of years, my auto score fluctuates three to five points every month. Currently, I am rated as fair down from good a couple of months ago. My credit rating is excellent. My VantageScore is perfect. I have no tickets or accidents on my record. As a matter of fact, the only claim I ever made with insurance occurred over 20 years ago when I hit a deer. I carry very high limits of coverage and have an umbrella policy as well. I am rated excellent for Homeowner’s Insurance which makes me more mystified. One would think the formula would be the same for any insurance we carry, but they would be wrong. It appears that this formula is set up to wring a few more dollars out of us.

    Kelly at 6:40 am on May 3, 2014
  41. Yes thank you for this article very helpful. I actually work with exotic and luxury car rentals and find that so many drivers have issues on there records from so many years ago that calling the DMV to ensure issues from years ago are removed is of vital importance to also get the best rates. Along with any other insurance issue that might prop up with home and other.

    Michelle at 12:09 am on May 13, 2014
  42. My Transunion credit score is nearly 800 and I observed that my auto insurance got reduced by 146 points while no credit activity was observed and no change in credit score. I received an email from credit karma team recommending me to check if my excellent auto insurance score can get me a better insurance premium with partner company All State. My Mistake! I clicked the linked and provided the required information and guess what my score dropped by 146 points 2 days later. Guys please be vigilant when providing your information and filling out any quote request even when if it is recommended by Credit Karma Team.

    Faisal Khan at 6:11 pm on June 18, 2014
  43. Mike

    Hi Faisal – I’m sorry to hear that. It’s possible that your application incurred a hard inquiry which in turn dropped your auto insurance score. You can read more about hard inquiries here: https://www.creditkarma.com/article/hard_inquiries_and_soft_inquiries

    Thanks!

    Mike at 2:50 pm on June 19, 2014
  44. It’s about your Beer Belly….. they can tell how much your drink and smoke…. That’s my wild guess….

    Man Le at 12:44 am on July 22, 2014
  45. Thank you CreditKarma,

    Richard McGinnis at 5:00 pm on October 12, 2014
  46. Companies must file their insurance credit scoring models with TDI. To request a copy of a company’s insurance credit scoring model, please submit an open records request to the Texas Department of Insurance.

    Clint at 6:08 pm on October 27, 2014
  47. Look closely and you’ll find some enlightening information on how and why each credit factor is used to develop insurance scores.

    https://www.consumerdisclosure.com/creditreport.jsp?entry=0161#0161

    Greg A at 3:17 pm on November 15, 2014
  48. Charmaine

    Thanks for sharing, Greg!

    Charmaine at 9:41 am on November 17, 2014

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