Insurance Scores: What You Should Know
What is an insurance score?
An insurance score is a score calculated from information on your credit report. Credit information is very predictive of future accidents or insurance claims, which is why carriers, and most insurers, uses this information to help develop more accurate rates. Each insurer has its own method for evaluating this credit information. At Progressive, we develop our method by analyzing the following data from people we have insured:
- Accident and insurance claim history
- Credit report information
The results of this analysis tell us what credit information will help us predict how likely you are to have a future accident or insurance claim. We assign a value to each predictive credit factor and add the values to calculate your insurance score. The lower your score with us, the better.
Are insurance scores the same as credit scores?
No. A credit score is based on your ability to repay amounts you have borrowed. An insurance score predicts the likelihood of you becoming involved in a future accident or insurance claim — it is based on information gathered from policyholders with similar credit characteristics who have had previous claims with us.
When banks and other lenders determine credit scores, they may factor in your income, job history and other matters that might affect your ability to repay a loan. Banks also can deny you a loan based on your credit score. We do not consider income or job history, and we won’t deny you a policy based on your insurance score.
What credit factors can affect an insurance score?
Favorable credit information results in lower premiums. Because both above-average and below-average factors are evaluated, you still have the opportunity to get a lower rate, even if there are some below-average items in your credit history.
Favorable credit factors might include:
- Long-established credit history
- Numerous open accounts in good standing
- No late payments or past due accounts
- Low use of available credit
Unfavorable credit factors might include:
- Collection accounts
- Numerous past-due payments
- High use of available credit
- Numerous recent applications for credit
These factors vary by state to comply with the laws of each state.
How can I improve an unfavorable insurance score?
While there are some things that are out of your control — having a short credit history, for instance — you can generally improve your insurance score with us by making loan and mortgage payments on time, keeping accounts in good standing, and avoiding numerous credit applications in a short period of time.
Also, look at how much credit you have available. If you are using all or nearly all of your available credit, it could be regarded as an unfavorable factor.