Recall that your credit score and history can have a big impact on your insurance rates. Well if you’ve ever wondered exactly how credit affects auto insurance rates, the answer is the insurance bureau score. The bad news is that you can’t look at your insurance score like you can your credit score. But the good news is that you can figure out the factors that go into the score and how you can improve it. And if you are ever turned down for insurance because of data in your credit report, you can get more information about the details that led to the denial.
Given the importance of this score to your insurance premiums, let’s take a more detailed look at insurance bureau scores.
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What is an Insurance Bureau Score?
An insurance bureau score is a snapshot of a person’s insurance risk based on information contained in their credit report. The score is used by insurance companies, along with other information, to assess risk on auto insurance policies and homeowner insurance. The score is based entirely on information contained in a consumer’s credit report, and it changes as information in the credit file changes.
So what information from your credit file is used to determine your insurance bureau score? Well, according to Fair Isaac, the information used includes the following:
- Outstanding debt
- New applications for credit
- Length of credit history
- Types of credit in use
- Late payments, collections, and bankruptcies
There is also information that Fair Isaac states is NOT factored into the score:
- Ethnic group
- Marital Status
- Familial Status
How to Improve Your Insurance Bureau Scores
Unlike a FICO score, you can’t get access to your insurance bureau score. But you can get some insight into your score from your insurance agent. In addition, there are ways to improve your score, and they mirror many of the ways to improve your FICO score. According to Fair Isaac, here are three ways to improve your insurance score:
- Pay bills on time. Delinquent payments and collections can have a major negative impact on a score.
- Keep balances low on unsecured revolving debt like credit cards. High outstanding debt can affect a score.
- Apply for and open new credit accounts only as needed.
Your first reaction to this list may be that it’s no different than how one should go about improving their credit score. And that’s exactly right. Your credit score and history determine your insurance bureau score, which in turn is a factor in setting your auto insurance premiums.
If you are ever turned down for car insurance in part due to information in your credit file, the Fair Credit Reporting Act (FCRA) requires that the insurer tell you, and give you the name of the credit bureau that provided the information. In these situations, you are entitled by law to receive a free copy of your credit report to review, in order to help you understand how to better manage your credit or to challenge any errors that might appear on your report.