What Is My Insurance Score and How Can I Improve It?

An insurance score is a numerical system used by insurers to assess risk. It helps determine the likelihood of a claim, influencing underwriting decisions and premiums. It is one of several tools insurers use to evaluate risk profiles for personal insurance lines like homeowners and auto coverage.

What is an Insurance Score?

An insurance score is a numerical assessment derived from an individual’s credit report. This score provides insurers with a snapshot of perceived risk, predicting future insurance claims. Insurers use these scores for new applications and existing policies. While it draws from credit information, an insurance score is distinct from a traditional credit score.

A credit score primarily measures an individual’s debt repayment ability. In contrast, an insurance score focuses on financial behaviors correlating with claim likelihood. Insurers use proprietary models, so calculations vary between companies and insurance types. However, the purpose remains consistent: to help insurers set premiums based on predicted risk.

Key Factors Influencing Your Score

An insurance score is primarily influenced by an individual’s financial history, especially credit behavior. Payment history carries significant weight, often a substantial portion. Timely payments on all financial obligations, such as loans and credit cards, positively impact the score; late or missed payments lower it. Credit utilization, the amount of outstanding debt relative to available credit, also plays a considerable role. Maintaining low balances signals financial stability and contributes to a better score.

The length of an individual’s credit history is another important factor, with a longer history of responsible credit management viewed favorably. Additionally, the pursuit of new credit, indicated by recent applications, can temporarily impact the score; frequent applications may suggest increased risk. Credit mix, the variety of accounts managed, also contributes. A balanced mix of different credit types, such as installment loans and revolving credit, demonstrates effective financial management.

Beyond credit factors, an individual’s claims history also directly influences their insurance score, especially for homeowners and auto policies. Information about past insurance claims, including date, type, and amounts paid, is collected in databases such as the Comprehensive Loss Underwriting Exchange (C.L.U.E.). Even inquiries about potential claims that did not result in a payout can be noted. For auto insurance, a driving record, including any accidents or violations, is another significant factor in determining the score.

Accessing and Reviewing Your Insurance Score

Unlike a credit score, consumers cannot directly request a specific numerical “insurance score.” However, individuals have the right to access the underlying reports that contribute to its calculation. The primary reports are consumer credit reports and the C.L.U.E. report.

Consumers are entitled to a free copy of their credit report once every 12 months from each of the three major nationwide credit bureaus: Equifax, Experian, and TransUnion. These reports are accessed through AnnualCreditReport.com. Additionally, a free C.L.U.E. report, which details up to seven years of personal property and auto claims history, is obtained annually from LexisNexis Risk Solutions.

If inaccuracies are found on a credit report, individuals can dispute the information directly with the credit bureau and the company that provided it. This process involves submitting a written dispute with supporting documentation. Similarly, errors on a C.L.U.E. report can be disputed by contacting LexisNexis directly. LexisNexis will then investigate the claim with the involved insurance company, and consumers can also add a personal statement to their report for context.

Strategies for Improving Your Insurance Score

Improving an insurance score involves adopting consistent and responsible financial habits. A primary strategy is to ensure all bills and debt payments are made on time. Payment history is a highly influential factor, and avoiding late payments significantly contributes to a favorable score. Establishing a consistent record of timely payments demonstrates financial reliability.

Maintaining low balances on credit accounts, particularly revolving credit like credit cards, is another impactful step. Keeping credit utilization ratios low, ideally below 30% of available credit, can positively affect the score. Paying down existing debt can also improve the overall financial picture reflected in the score.

Limiting applications for new credit is also beneficial, as frequent requests can temporarily lower the score. Additionally, maintaining a long and active credit history by keeping older accounts open and in good standing can strengthen the score over time. Regularly reviewing credit reports and C.L.U.E. reports for accuracy and promptly disputing errors ensures that the information used to calculate the score is correct. Finally, individuals can consider limiting the number of small, non-catastrophic claims filed, as claims history directly impacts the insurance score.