What You Need to Know About Credit-Based Insurance Scores

What You Need to Know About Credit-Based Insurance Scores

In the USA, with some state exceptions, most major and small-time car insurance firms rely on credit-based insurance scores to assess risk and calculate an individual’s premium. Through this model, those with high credit ratings will enjoy lower premium rates as opposed to those carrying a damaged or underdeveloped credit report.

A fairly recent survey by Conning & Co. estimates nearly 92% of insurers use credit-based insurance scores when deciding on auto and home insurance premiums. In Canada, however, this number is much lower due to government interference in the last few years. As of 2010, Ontario passed Bill 130, banning the use of credit scores for personal property insurance. The next year, Newfoundland and Labrador followed-suit, yet many provinces still debate the usefulness of credit-based insurance scores when it comes to automobiles.

But what’s the difference between a regular credit score and a credit-based insurance score? For starters, an insurance score is typically more involved with a report’s history of stability and reliability, meaning that it excludes factors like employment, income, gender, and other related information. Due to the narrowness of the score, insurers then look at things such as driving history and number of claims made in the past. Interestingly enough, many studies reveal that those who are delinquents in paying their bills file expensive claims more often, which is a main part of the argument insurance companies standby year-after-year.

If you are concerned about the state of your credit-based insurance score, you can take similar action in-line with what we’ve discussed before. Since your score looks for long-term patterns, however, temporary inflation tricks will not work, meaning you must focus on good behaviour like timely payments. Collections, debt, closed accounts, and a high number of credit inquires will affect this score negatively, so when shopping around for an auto-loan or insurance, pay mind to the fact that each denied application may take a few points off-the-top.

To save yourself the trouble, when looking for an auto-loan, swing by Trillium Auto Group and see what our automotive and credit specialists can do for you. Not only will we find the right vehicle for you through our guaranteed financing plan, but you will drive away safely knowing that each vehicle comes with a factory warranty. Since we help to improve your credit score as well, when it comes to finding insurance, the concerns discussed above will not weigh so heavily on your mind.