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Frequently asked questions about credit scoring
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Most insurance companies look at your credit information before they offer you coverage and when deciding how much to charge.
Don't they need my permission?
Why do insurance companies use credit information?
How do insurers use credit history?
How do I know if an insurance company is looking at my credit?
What if I don't have a credit history?
What kind of credit information do insurance companies use?
How can I correct my credit report?
How can I improve my credit score?
Don't they need my permission?
No. Federal and state law allow insurers to look at your credit history. However, Commissioner Kreidler believes it's unfair - especially in today's economy. He successfully limited its use and has tried to ban it.
Why do insurance companies use credit information?
Insurance companies believe there is a relationship between how you handle your finances and the likelihood that you'll file a claim.
How do insurers use credit history?
Many auto and homeowners insurance companies look at consumer credit information to decide:
- Whether or not to issue or renew an insurance policy
- How much premium to charge
How do I know if an insurance company is looking at my credit?
Ask your insurance agent or company if they use credit information to decide if they'll insure you and to set your premium. Also ask if they check the credit history of other people insured on your policy, such as family members, and how their credit history will impact your policy.
What if I don't have a credit history?
If you don’t have a credit history, insurers cannot deny you coverage. However they can use this to set your premium if they've given us data showing that people without credit histories are more likely to file a claim.
Also, sometimes an insurer will find “no hits” or “no score.” This means they can’t find a meaningful credit history for you. If you think you have a credit history but the insurer cannot find it, make sure your agent or insurance company has your correct name, address, social security number, and birth date.
What kind of credit information do insurance companies use?
Most companies that use credit information create an “insurance credit score.” They calculate your score using information from your credit history and other factors. Most weigh recent history more heavily than old credit history. Some factors they consider:
- Bankruptcy, collections, foreclosures and liens generally lower your insurance credit score
- If you have not paid your bills on time, your insurance score will go down
- The amount of time you’ve been in the credit system
- Number of open lines of credit
- Outstanding debt
Insurance companies use different formulas to come up with their credit scores
For example, one company might think that public records are more important than past payment history. Another company might take the opposite view.
Updated 12/01/2011
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