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What is FICO Credit-Based Insurance Scores?

FICO Credit-Based Insurance Scores use the credit information from your credit report to determine how likely you are to have insurance claims that will result in losses for the insurance company.

The scores are calculated from many different pieces of information in your credit report. Your previous credit performance (payment history) accounts for approximately 40 percent. Your current level of indebtedness (money owed) make up 30 percent of your score. Length of credit history and new credits or pursuit of new credits are also important factors.

Things like your age, where you live, salary, occupation, title, employer, date employed, or employment history are not in your score.

However, while many insurers use insurance scores, they do not use the scores in isolation to set pricing. They will also look at a wide range of other factors, including a motor vehicle report and a claims history report.

What is the difference between a credit score and an insurance score?

Credit scores are used by financial institutions for many kinds of decisions, such as whether you get a credit card, or what interest rate you will receive on your loan. There are clear similarities between your credit risk score and your insurance score, but they are not the same thing! Insurance scores are used differently from the way a bank would use a credit risk score.

The insurance score indicates whether you are more or less likely to have insurance claims in the near future.

Your credit score is used to predict your ability to repay borrowed money.

Things to remember:

People that have high FICO insurance scores:

  • Pay bills on time.
  • Keep a low balance on credit cards.
  • Rarely applies for or open new credit accounts.

If you need a new loan or credit, do your rate shopping within a focused period of time, preferably 30 days. Looking for an auto loan over a long period of time will cause multiple lenders to request your credit report, even though you’re only looking for one loan. Inquiries within a 30-day period will count as just one inquiry.