Insurance score

An insurance score is a credit-based number that an insurer or its vendor calculates from your credit report to estimate the odds you will file a claim. It is not the FICO score a lender uses, though it starts from the same raw data: payment history, balances, length of credit history, recent applications and types of credit. You can have a strong credit score and a mediocre insurance score, or the reverse.

Insurers generally apply the score as a rating factor, so a better score can mean a lower premium, and it can also decide which company in a group offers you coverage. States regulate it. According to the NAIC, most states do not let insurers use the score as the only reason to raise a rate or to deny, cancel or not renew a policy, many require a notice naming the reasons when credit played a part in an adverse decision, and a handful ban or sharply restrict the practice for some lines.

Insurer credit checks are soft inquiries and do not lower your credit score. Accuracy matters: an error on your credit report can raise your premium, and a corrected report can justify a re-score at renewal. Ask your agent whether the carrier uses credit in your state. See insurance scores: how credit affects home insurance and what affects your homeowners insurance rate.