How to improve your insurance score Make payments on time. Focus on paying all your bills on time, every time, and catch up on debts. If you have overdue accounts, catch up and make the required payments in a timely manner in the future, reduce your debt. You can increase your car insurance score by ensuring that you have a long and healthy credit history.
Keep in mind that anything you can do to increase your credit score will also positively affect your car insurance score. A car insurance score is a rating that insurance companies use to assess your risk. Your insurer can calculate your insurance rating on its own or use a third party, such as FICO, LexisNexis or TransUnion, to obtain the data. Each insurer and rating agency calculates auto insurance scores differently, so you won't have the same score at every company.
Auto insurance companies have good reasons to check credit, as the Federal Trade Commission has demonstrated that insurance ratings effectively predict risk. The final insurance policy premium for any policy is determined by the insurance company upon application. The District of Columbia allows credit-based ratings as one of several factors in determining homeowners insurance and auto insurance premiums. Even moving a short distance or paying some credit card bills late can increase the cost of car insurance.
According to FICO, a data and analysis company that measures credit risks, many insurers use credit-based insurance ratings in states where it is legally allowed. Insurance scores can range from 100 to 999, although the actual minimum and maximum values depend on the insurance company. However, getting car insurance quotes and buying a policy won't hurt your credit, as insurers use what's called a soft consultation, rather than a hard consultation. The most common reasons for high car insurance costs include your driving history, age, coverage options, where you live, the car you drive, your credit history, or not taking advantage of discounts.
You can determine your insurance rating by consulting with individual insurance providers, as they all have slightly different ways of calculating this number. But even if your previous accidents aren't part of your car insurance score, all insurance providers will use your previous accidents and claims to set rates. Like a traditional credit score, auto insurance scores (also called credit-based insurance scores) are based on information related to your borrowing, paying, and borrowing habits. Your insurance rating is just one of many factors that affect your car insurance rate, but it can carry a lot of weight.
Because your insurance rating and credit score come from many of the same sources, you could improve your car insurance rating in the same way as your credit score. In New Jersey, the state where credit affects car insurance the most, rates are twice as expensive for drivers without credit compared to those with excellent credit. Insurers and credit rating agencies don't allow most people to check their insurance scores for free, as is the case with credit reports.