How Are Auto Insurance Scores Calculated

How Are Auto Insurance Scores Calculated

Auto insurance scores are calculated by insurers and specialty consumer-reporting firms using a proprietary formula that weighs credit-related information, driving history, and policy details to estimate the likelihood of a claim. The score is not a FICO score, but it draws heavily on credit report data and is one factor insurers use to set premiums.

Credit-Based Factors in the Insurance Score

Most insurance scores rely on information from your credit report. While the exact weights are secret, the factors that typically influence the calculation include payment history, credit utilization, length of credit history, types of credit accounts, and recent inquiries. Late payments, collections, bankruptcies, and high revolving balances tend to lower the score, while a long history of on-time payments and low balances tend to raise it.

Driving and Policy Factors That Supplement the Score

Insurers rarely use the insurance score alone. They layer it with driving history, claims frequency, vehicle type, miles driven annually, and policy details such as deductibles and coverage limits. A driver with a strong insurance score but multiple recent accidents may still face higher premiums than someone with a moderate score and a clean record.

Why Insurers Use Insurance Scores

Studies show that credit-based insurance scores correlate with claim frequency, so insurers treat them as a predictive risk tool. Regulators in most states permit their use, though a few states restrict or ban credit-based scoring entirely. Insurers must notify you if your credit information affects your rate and give you the chance to dispute inaccuracies.

What You Can Do

• Check your credit report for errors and dispute anything that is outdated, inaccurate, or belongs to someone else.
• Pay bills on time and keep credit card balances low relative to limits.
• Avoid opening several new credit accounts in a short period.
• Shop for insurance regularly, since different insurers weight credit factors differently.