What’s the difference between an insurance score and a credit score?

Credit score vs. insurance score

If your credit score has taken a few hits over the years, you may think all is lost when it comes to getting affordable insurance. However, there’s actually a little-known difference in the insurance world when it comes to getting rates or quotes. Finding better insurance premiums truly depends on your insurance score, which is different from your credit score. However, the two are very closely related. Here’s how.

What is an insurance score?

An insurance score is a number that certain carriers may use to determine the risk of insuring you. Some of these aspects are a part of your credit score, but not the entire thing. Carriers tend to use this information because of a study that was conducted showing a correlation between certain credit behaviors and an overall tendency to risky behavior. (Hey, we don’t make the rules.)

What is the difference between a credit score and an insurance score?

While some carriers use credit-based insurance scores, a simple insurance score won’t use all the factors that make up your credit score. Your credit score typically accounts for:

  • Your credit history
  • How many credit accounts you have
  • The amount of debt you have
  • The length of your credit history
  • How many times you’ve tried to open a new line of credit
  • The types of credit accounts you have (credit cards, mortgages, car loans, etc.)

Your typical insurance score, however, could only take some of these factors, such as:

  • The length of your credit history
  • If you’ve paid your bills on time and consistently
  • If your accounts are in good standing
  • You’ve only used a small amount of credit compared to the amount you’re eligible for

Of course, these factors may vary from state to state and from carrier to carrier. So, you may want to ask your agent if the insurance company uses a credit-based score.

How does my credit score affect my insurance?

As we’ve said, there’s been a study done about the relationship between certain credit behaviors and the insurance risks they pose. However, those aren’t the only factors that an insurer may consider when determining your rates. If your insurance company does use a credit-based score or you have a record of overdue payments on high lines of credit, then you may just have higher insurance rates.

Otherwise, there are a bunch more factors that go into determining premiums for home insurance and car insurance – and they’re all different. Some common factors may include:

How can I improve my score?

That being said, if you’re having a tough time getting auto or home insurance, improving your insurance score will be a lot like trying to improve your credit score. However, the key things to work on are:

  • Making bill payments on time, including rent and mortgage
  • Avoiding applying for multiple lines of credit in a short window of time
  • Paying down the balance on existing credit lines
  • Keeping an eye on your credit report by getting your annual free report from one of the federal credit unions (Equifax, TransUnion, or Experian)

There may also be carriers that don’t use credit or insurance scores at all. our agents have relationships with tons of home insurance and auto insurance companies that could fit your needs best. Plus, we look at your insurance year after year. So, if your insurance situation improves, we can help you find more available carriers with low rates. To start getting free, customized quotes with our professionals, give us a call, fill out our online form, or LiveChat with an agent today!

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