Insurance Credit Score – What is It?

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Insurance companies can use your credit history when you apply for new auto or home insurance. Here is some valuable information that will help you understand how insurance companies use your credit history.

What is an insurance credit score?

A credit score is a snapshot of your credit at a specific point in time. Insurance companies use information from your credit history and your insurance application to calculate a specific insurance credit score. Your insurance credit score ranges from 0-999, with a higher number conveying a better score.

How is an insurance credit score used?

If your insurance company relies on credit scoring, it might use your credit score to underwrite and rate your policy.

– Underwriting is the process of deciding whether to issue you a new policy or to renew an existing policy.
– Rating is the process that determines how much you pay for insurance. In addition to using credit information, insurance companies will use other, more traditional rating factors to determine the premium you pay for your auto or home insurance policy. Some of these traditional rating factors include:

– Auto Insurance – driving record, type of car you own, where you live.
– Homeowners Insurance – where you live, cost to replace your home, claim history.

How will I know if my credit history has affected my insurance purchase?

The FCRA requires insurance companies to notify consumers if an adverse action is taken because of their credit information. FCRA defines adverse action to include denying or canceling coverage, increasing premiums, or changing the terms, coverage, or amount of coverage in a way that harms the consumer. If an insurer takes an adverse action due to your credit history it also must notify you of the name of the national credit bureau that supplied the information.

Examples of an adverse action include:

-Canceling, denying or not renewing coverage;
-Giving the consumer a limited coverage form;
-Limiting benefits, such as eligibility for dividends;
-Issuing coverage other than for what was applied;
-Not giving the consumer the best rate;
-Not giving the consumer the best discount;
-Adding a premium surcharge.

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