What is insurance scoring, and how does it affect my insurance premiums?
What is insurance scoring?
If you have ever applied for a mortgage or financed a vehicle, you have likely heard about FICO (Fair Isaac Corporation) scores. FICO credit scores are used by financial institutions and credit card companies to determine whether you will get a loan and at what interest rate. It uses information from a consumer’s credit report to indicate the ability to repay amounts borrowed.
An insurance score is a different kind of score that is used by most insurers to determine your eligibility for coverage and what your premiums will be. The insurance score predicts the likelihood of future insurance losses.
Insurance scores take into account many aspects of your credit report, including your payment history and types and levels of current debt.
How is insurance scoring used?
Your insurance score, together with your past claims history, driving record (for auto insurance), property inspection (for property insurance), the type and value of the vehicle/home you are insuring, and other relevant information, determines your premium rates.
What information does not affect my insurance score?
An insurance score does not take into account income, race, gender, marital status, religion, age, nationality, ethnicity or handicap.
How does insurance scoring affect me?
This is what insurance scoring means for you:
- Before the use of scoring, underwriting was often a slow and subjective process. Underwriting decisions are now fairer to all because the process is more objective.
- Scoring has made insurance rates lower overall, according to FICO, because more efficient processing results in cost savings for insurers.
- Improvements to your credit report can positively impact your insurance rates.
- Insurers who use scoring can offer you more policy options because they have a better understanding of the risk they are taking on.
How does Member Benefits use insurance scores?
Member Benefits uses insurance scores along with a number of other predictive rating variables to determine the most accurate premium available for our policyholders. Insurance scores serve as an objective, accurate, and consistent tool that we use to more effectively estimate the likelihood of future claims. By doing this, we can better control risk, enabling us to offer insurance coverage to more consumers at a fairer cost.
Can I find out my insurance score?
Insurance scores are furnished to Member Benefits by a third-party vendor called LexisNexis® Services,Inc. Unfortunately, we are unable to disclose the scores to our customers as this information is proprietary.
Does an inquiry by an insurance company affect my credit rating?
There is no effect on your credit rating when Member Benefits or another insurance company makes an inquiry into your credit history. However, the inquiry will be present on your credit report should you choose to obtain one.
Can I get a copy of the report used to determine my premium rate?
We will notify you if you have been adversely affected by information contained in a consumer report provided by our consumer reporting agency, LexisNexis® Services, Inc., with instructions on how to obtain a report.
What if the information in my credit report is wrong?
If you find errors on your credit report, contact LexisNexis® or the credit reporting agency that provided the credit report disclosure. By law, the credit reporting agency must investigate and respond to your request. If the information is found to be inaccurate or unverifiable, the agency should promptly delete the information from your records. If the investigation does not resolve the dispute, you may file a brief statement setting forth the nature of the dispute with the consumer reporting agency. Your statement should be included or summarized in any subsequent consumer report containing the information in question.
If any errors have been corrected, please notify LexisNexis® and Member Benefits as you may qualify for a more favorable rate. Please be aware that some errors may have little or no affect on your insurance score and/or insurance premium.
What can I do to improve or maintain a good credit score?
Raising your credit score may help you get more favorable rates on financial services including insurance, mortgage loans, and credit cards. Here are tips to help you improve your score:
- Pay your bills on time.
More than one-third of your score is based on your payment history. It may help to set up payment reminders or automatic payment deductions through your bank or credit union.
- Keep credit card balances low.
It’s a good idea to stay under 25% of your credit limit, even if you pay your bill in full every month.
- Limit the credit cards you open.
Opening several new cards in a short time lowers the average age of your account sand also means inquiries into your credit report. Too many inquiries of this kind will have a negative impact on your score.
- Check your credit report for errors.
Visit annualcreditreport.com to request a free report every 12 months from Equifax, Experian, and TransUnion.
- Get help if you need it.
If you are having trouble making ends meet, contact your creditors or see a legitimate credit counselor. Seeking help from a credit counseling service will not hurt your score.
If you show good credit behavior over time, your credit score may improve as a result.
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