[et_pb_section fb_built="1" _builder_version="4.0.9"][et_pb_row _builder_version="4.0.9"][et_pb_column type="4_4" _builder_version="4.0.9"][et_pb_text _builder_version="4.0.9"]<h1 id="article-heading_2-0" class="comp article-heading mntl-block" style="text-align: center;"><strong><span id="article-heading__highlight_2-0" class="comp article-heading__highlight mntl-text-block">What Is Insurance Credit Scoring?</span></strong></h1>[/et_pb_text][/et_pb_column][/et_pb_row][et_pb_row _builder_version="4.0.9"][et_pb_column type="4_4" _builder_version="4.0.9"][et_pb_text _builder_version="4.0.9"]<div align="center">
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<p><span style="color: #000000;"><img src="https://www.thebalance.com/thmb/PJYgiqsdb9ifVbC1DeWRfqnSeKw=/2121x1414/filters:fill(auto,1)/InsuranceScorehowitworks-5a42f332494ec90036720943.jpg" width="800" height="533" style="display: block; margin-left: auto; margin-right: auto;" /></span></p>
<p><span style="color: #000000;">What makes a person really insurable? Is there a score that can help you understand how to </span><a href="https://www.thebalance.com/ways-to-lower-home-insurance-costs-and-save-money-4175276" data-component="link" data-source="inlineLink" data-type="internalLink" data-ordinal="1">get lower insurance prices</a><span> </span><span style="color: #000000;">or good deals on your insurance premiums?</span></p>
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<p><span style="color: #000000;">Some companies use Insurance-Credit scoring, but there is no one score used by everyone.</span></p>
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<p><span style="color: #000000;">We review all the factors that go into how an insurance company determines your insurability, as well as provide insight into what kinds of things could help you bring your insurance prices down by understanding insurance scoring with a few simple tips.</span></p>
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<p><span style="color: #000000;">For years insurance companies have been experts at coming up with ways to figure out how likely it is that an accident or "loss" will happen, or </span><a href="https://www.thebalance.com/what-is-insurance-underwriting-2645778" data-component="link" data-source="inlineLink" data-type="internalLink" data-ordinal="1">analyzing what the risk is</a><span> </span><span style="color: #000000;">in a situation. Based on this assessment and using complex factors, insurance companies determine premiums.</span></p>
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<p><span style="color: #000000;">Some companies may use stability rating or micro rating, for example, which may combine aspects of credit rating, zip or postal code rating data (which focuses on location in known claims areas) or risks based on the infrastructure of the district (that impact claims). <span class="mntl-inline-citation mntl-dynamic-tooltip--trigger" data-id="#citation-2">1</span></span></p>
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<p><span style="color: #000000;">These are all very complex, so as a base point, understanding </span><a href="https://www.thebalance.com/understanding-what-is-an-insurance-premium-4155239" data-component="link" data-source="inlineLink" data-type="internalLink" data-ordinal="1">how an insurance premium works</a><span style="color: #000000;">, gives a pretty straightforward insight into your insurability or how an insurance company would score you as a potential client or</span><span> </span><a href="https://www.thebalance.com/homeowners-insurance-peril-2645726" data-component="link" data-source="inlineLink" data-type="internalLink" data-ordinal="2">risk</a><span style="color: #000000;">.</span></p>
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<p><span style="color: #000000;">Most people think about their basic loss experience, or the number of claims when they think about insurance rates.</span></p>
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<p><span style="color: #000000;">Insurance claims are not the only factors that come into play when an insurance company is assessing your insurability and the appropriate pricing for insuring you. Here are several factors that can impact your cost of insurance:</span></p>
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<li><span style="color: #000000;"><strong>Your Insurance History</strong></span><br /><span style="color: #000000;">How long you have been insured, if you have paid your premiums consistently, if you have ever been</span><span> </span><a href="https://www.thebalance.com/policy-canceled-for-non-payment-2645553" data-component="link" data-source="inlineLink" data-type="internalLink" data-ordinal="1">canceled for non-payment</a><span> </span><span style="color: #000000;">by an insurance company. </span><span style="color: #000000;"></span></li>
<li><span style="color: #000000;"><strong>Your General Financial History and Behavior</strong></span><br /><span style="color: #000000;">Although credit scoring is not used with all insurance companies or in all states, many insurance companies may ask for your permission to check your credit. Having declared a recent bankruptcy or poor credit may affect what kind of policy you qualify for. </span></li>
<li><strong style="color: #000000; font-size: 14px;">Your Driving Record, and Claims History<br /></strong><span style="color: #000000;">How many tickets or moving violations you have on your driving record can impact your insurability and </span><a href="https://www.thebalance.com/car-insurance-prices-up-with-no-claims-3881505" data-component="link" data-source="inlineLink" data-type="internalLink" data-ordinal="2">cost of your car insurance</a><span style="color: #000000;">. Some insurance companies have underwriting guidelines that will not allow them to insure you when you have</span><span> </span><a href="https://www.thebalance.com/what-is-a-car-insurance-surcharge-527252" data-component="link" data-source="inlineLink" data-type="internalLink" data-ordinal="3">too many claims or tickets</a><span style="color: #000000;">, in these cases, you may have to go to a high-risk insurer or pay much higher costs.</span></li>
<li><strong style="color: #000000; font-size: 14px;">How You Use Your Car<br /></strong>If you do high mileage or use your car for business, this will also play into your <a href="https://www.thebalance.com/best-car-insurance-4158710" data-component="link" data-source="inlineLink" data-type="internalLink" data-ordinal="4" style="font-size: 14px;">car insurance rate</a><span style="font-size: 14px; color: #000000;">. For example, if you have several drivers on one car, the risks of having an accident increases because the car is on the road a lot more than if just one person is driving to and from work every day. Higher mileage may pay higher rates due to increased usage or mileage even though the primary driver is only driving to and from work a very short commute every day; the annual mileage will help the insurance company understand how often the car is on the road. The more a car is on the road, the more likely an accident is to occur.</span></li>
<li><strong style="color: #000000; font-size: 14px;">Your Personal Information<br /></strong><span style="color: #000000;">Every insurance company has different target clients. For example, if a company is trying to appeal to seniors, then just being a senior may make you "score higher" with the insurance company who is trying to appeal to senior-aged clients. Another example is insurance companies who are trying to attract university graduates, professionals or people living in certain neighborhoods.</span></li>
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<p><span style="color: #000000;">The moment your personal profile falls into what the insurance company is looking to insure, your insurability and "score" or appeal with that insurance company increases and your price will be competitive.</span></p>
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<h2 id="mntl-sc-block_1-0-22" class="comp mntl-sc-block mntl-sc-block-heading" style="text-align: justify;"><span class="mntl-sc-block-heading__text" style="color: #000000;">Do All Insurance Companies Use the Same Insurability Criteria?</span></h2>
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<p><span style="color: #000000;">No, there is no one "insurance score" that all insurance companies use.</span></p>
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<div id="google_ads_iframe_/479/thebalance/bal_other-insurance-topics/billboard5_0__container__"><span style="color: #000000;"><span style="font-size: 14px; text-align: left;">There are only guidelines and common aspects of factors each insurance company will use depending on their own business strategy. Each insurance company has</span><span style="font-size: 14px; text-align: left;"> </span></span><a href="https://www.thebalance.com/what-is-insurance-underwriting-2645778" data-component="link" data-source="inlineLink" data-type="internalLink" data-ordinal="1" style="font-size: 14px; text-align: left;">actuaries and underwriters who determine rates</a><span style="font-size: 14px; text-align: left; color: #000000;">. Your "score" would be viewed differently with each of them, based on their underwriting criteria. </span></div>
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<p><span style="font-size: 14px; text-align: left; color: #000000;"><br />O</span><span style="font-size: 14px; color: #000000;">ne factor that will help get you a good price with many insurance companies, regardless of their business plan or target clients, is having a high</span><span style="font-size: 14px;"> </span><a href="https://www.iii.org/article/what-does-my-credit-rating-have-do-purchasing-insurance-1" data-component="link" data-source="inlineLink" data-type="externalLink" data-ordinal="1" target="_blank" rel="noopener noreferrer" style="font-size: 14px;">insurance credit score</a><span style="font-size: 14px; color: #000000;">. </span></p>
<p>Studies have shown that having high credit scores are indicators of financial stability, and financial stability has been shown to be a good indicator of how likely a person is to make a claim.</p>
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<h2 id="mntl-sc-block_1-0-29" class="comp mntl-sc-block mntl-sc-block-heading" style="text-align: justify;"><span class="mntl-sc-block-heading__text" style="color: #000000;">Credit-Based</span></h2>
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<p><span style="color: #000000;">According to the Insurance Information Institute, thinking that your credit score has nothing to do with your insurance is a myth. </span></p>
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<h2 class="comp mntl-sc-block mntl-sc-block-heading" style="text-align: justify;"><span class="mntl-sc-block-heading__text" style="color: #000000;">How Do You Figure It Out?</span></h2>
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<p><span style="color: #000000;">There is no one score that will apply to all insurance companies because they all use different ratings.</span></p>
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<p><span style="color: #000000;">Using different rating structures is one-way insurance companies can compete in the marketplace. Each insurance company identifies areas they think they can do well in, and go after that kind of client. You can become familiar with your credit score though.</span></p>
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<p><span style="color: #000000;">The National Association of Insurance Commissioners (NAIC) explains that there are a few different companies that provide Insurance-Credit Scores to insurance companies. For example, according to the NAIC, this is what FICO provides insurers when they are asked for the insurance credit score:</span></p>
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<li><span style="color: #000000;">Payment History</span></li>
<li><span style="color: #000000;">Outstanding Debt</span></li>
<li><span style="color: #000000;">Credit History Length</span></li>
<li><span style="color: #000000;">New Credit Applications</span></li>
<li><span style="color: #000000;">Credit Mix (type of loans, credit cards, revolving credit, etc.)</span></li>
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<p><span style="color: #000000;">Those factors can change fairly quickly, so if you are hit with high insurance rates one year, and it happened to be the year you had maxed out all your cards and had to get a new car, so we're applying for credit a lot, 6 months to a year later your insurance credit score <em>could change completely</em> when things settle down.</span></p>
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<p><span style="color: #000000;">If any of your credit score factors change, an insurance premium that uses credit-based insurance scoring may also change as the situation settles down or stabilizes always be sure and follow up on this at the time of your renewal, or anytime you get a chance to revise your rating.</span></p>
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<p><span style="color: #000000;"><br />All of these factors are confusing. If all insurance companies had one way to look at things it would make things much easier for consumers. On the flip side, it might eliminate healthy competition because there would be no competitive advantage. It would also eliminate the opportunity for you to get lower rates when your profile is better than average.</span></p>
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<p><span style="color: #000000;">One company has come up with an easy online tool that gives an "<strong><em>Insurability Score</em></strong>", but it is important to note that this is not a rating factor in itself used by insurance companies. It is not the same as the insurance credit score or insurance-credit scoring. The <strong><em>Insurability Score</em></strong> is a tool developed by <strong><em>The Zebra</em></strong> to help consumers understand their general insurance profile on a basic level by asking questions and providing a "score". According to <strong><em>The Zebra</em></strong>, this gives users unique insight into behaviors and factors that affect their auto insurance risk.</span></p>
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<p><span style="color: #000000;">We've gone over several different ways insurance companies may "score" you to:</span></p>
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<li><span style="color: #000000;">determine your insurability</span></li>
<li><span style="color: #000000;">give discounts</span></li>
<li><span style="color: #000000;">use credit score and insurance payment history</span></li>
<li><span style="color: #000000;">offer better insurance rates and lower prices</span></li>
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<p><span style="color: #000000;">The most important factor in figuring out how insurable you are is to understand what criteria are important to the insurance company.</span></p>
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<p><span style="color: #000000;">Once you understand how they will be rating you, you can try and renegotiate rates when the factors are in your favor and improve factors that are hurting you or <a href="https://www.thebalance.com/paying-penalty-for-canceling-insurance-worth-it-2645556" data-component="link" data-source="inlineLink" data-type="internalLink" data-ordinal="1" style="color: #000000;">find another insurance company</a> willing to offer you better prices.</span></p>
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<p style="text-align: justify;"><span style="font-size: 14px; text-align: left; color: #000000;">To read the full article, </span><a href="https://www.thebalance.com/what-is-insurance-credit-scoring-4156729">click here</a><span style="font-size: 14px; text-align: left;">.</span></p>
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