What Is an Auto Insurance Score?

Well, you can add one more lesser-known item to that list: an auto insurance score. Let’s take a look at what an auto insurance score is and what it means.

An auto insurance score is a three-digit number that companies use to calculate your likelihood of filing a claim, which helps them set insurance rates. The industry is largely contingent on calculating risk, and an insurance score is one of the best ways a company can determine the risk of a potential policyholder.

Like a credit score, your insurance score is a reflection of how good of a borrower and repayer you are. Each insurance company can have a slightly different way of generating insurance scores; there is no uniform, industry-wide formula. But, for car insurance, your credit payment history and current debts are certainly factored into it.

An insurance score is drawn from many of the same sources as your credit score, but the two aren’t linked to each other. They’re just derived from similar information. 

Since your insurance score captures your spending, borrowing and repaying habits, it’s clear to see how this could be an integral part of determining your premium. If you have a bad score, your rate is likely to be higher to offset the increased risk your insurance score indicates. Basically, the insurer will charge you more to make sure you pay.

If you have a good score, a company would likely be more willing to give you a lower rate since it can be more confident that you’ll consistently pay on time. It’s easier to trust a policyholder with a good insurance score because that person has a good history of paying bills. 

Like a credit score, a higher insurance score is better. Common insurance scores range from around 300 on the low end to somewhere in the 800s or 900s at the top. It varies from company to company. 

Also, what a firm considers a good score can vary. Generally, an insurer will view a score in the mid 700s or higher favorably. Odds are, if you have a good credit score, you have a good insurance score. The two aren’t directly related, but a lot of the same information is used when determining both. 

You can improve your insurance score in many of the same ways you can improve your credit score. Paying lenders on time, keeping balances reasonable, and not going crazy opening and closing different accounts and cards can all raise a low score over time.

An auto insurance score can go down in the same ways a credit score can, too. Late payments will have an adverse effect on both reports. Filing for bankruptcy would also likely greatly damage your scores.

Applying for loans and new cards appear on your credit score. If you file for many new lines of credit in a short period of time, especially while you haven’t paid off existing ones, both your credit and insurance scores will certainly go down. Plus any insurance claims you file have a significant impact on your insurance score.

Unlike a credit report, there are no free options to check your auto insurance score. You can pay to find out your score from FICO or LexisNexis, which are two popular financial data and analytics companies. 

It’s much easier to check your credit score, which is a good indicator of your insurance score. There are several ways to check your credit score for free. This won’t give you an exact number of what your insurance score is, but if your credit score is good, your insurance score is probably good, too, and vice versa.

Also, if you always pay your bills on time and have never filed a car insurance claim, you’ve really got no need to check your insurance score. It’s likely good. While it’s not exactly known how claims history affects a car insurance score, a general rule of thumb is the more claims you’ve filed, the higher your premiums will be. Thus, claims can also affect your rate.