What credit score does car insurance use?

Insurance ratings typically come from Fair Isaac Corporation (FICO), LexisNexis and TransUnion. A good insurance score is approximately 700 or more, although it varies by company. Nationwide uses a credit-based insurance score to determine premiums. Studies show that using this score helps us better predict insurance losses.

In fact, 92% of all insurers now consider credit when calculating auto insurance premiums. Find out how you can save on costs by taking advantage of affordable car insurance with discounts. Auto insurance companies can, and often do, consider your credit history or use a credit-based insurance score before offering you coverage. FICO estimates that approximately 95% of auto insurers and 85% of homeowners insurers use credit-based insurance ratings in states where it is a legally permitted underwriting factor or risk classification.

The insurance score predicts the likelihood that you will be involved in an accident or insurance claim in the future and is based on information collected from policyholders with similar credit characteristics who have had claims with us before. Even if they know about the existence of credit-based insurance scores, it's not intuitive for consumers to understand how credit-based insurance scores work or why they work. For example, classic car insurance is specifically designed for the unique needs of those who appreciate classics. Insurers use credit-based insurance ratings for underwriting, assigning consumers to a pool based on risk, and then to qualify when deciding how to adjust the premium up or down.

These discounts can include a discount for driving if you haven't had an accident recently, or discounts for multiple vehicles and policies if you insure multiple vehicles or have different types of insurance from the same company. When determining your car insurance credit score, gender, marital status, age, ethnicity, address, or income are never taken into account. A credit-based insurance score allows insurers to quote the fairest and most appropriate rate for each customer. Insurers argue that the use of credit-based insurance scores is necessary to properly assess risk and charge policyholders the rates that best match their actual risk.

Some states, including California, Hawaii, Washington, Massachusetts and Michigan, strictly limit or completely prohibit the use of credit information by insurance companies to determine auto insurance rates. Many auto insurance companies use a credit-based auto insurance score to decide if they take out you as a policyholder, as well as the premium you'll pay if they do. Whether or not an insurance company uses a credit-based insurance score, a wide variety of factors are taken into account in determining your eligibility and rates. While credit ratings try to predict the likelihood that a consumer will be 90 days late on a payment over the next 24 months, credit-based insurance ratings try to predict the likelihood that a consumer will file insurance claims that will cost the company more money than it collects in premiums.

Consumer groups continue to be concerned about the use of credit-based insurance ratings, including the fact that most consumers don't understand the concept of credit-based insurance ratings or how or why it works...

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