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Where does an insurance score come from?
Most insurance companies do not directly participate in the process of developing a consumer’s insurance score. Insurers generally hire a vendor to look at the information provided by major credit bureaus, and use it to develop an insurance score for you. The vendor then gives your score, not your credit report, to the insurer. Insurance scores vary by company due to the information provided and the vendor formula used to calculate the score.
What factors can affect your insurance score?
There are a number of factors that determine insurance scores. One insurer might place more weight on a certain factor while another insurer might not consider it at all. Following is a list of common factors:
· Major negative items — Bankruptcy, collections, foreclosures, liens, etc.
· Past payment history — Number and frequency of late payments.
· Length of credit history — Amount of time you have been in the credit system.
· Inquiries for credit — Number of times you’ve recently applied for new accounts, including mortgage loans, utility accounts, credit card accounts, etc.
· Number of open credit lines — Number of open credit cards, whether you use them or not.
· Type of credit in use — Major credit cards, store credit cards, finance company loans, etc.
· Outstanding debt — How much you owe compared to how much credit is available to you.
What can you do to improve your insurance score?
· Pay bills on time. Delinquent payments and collections can have a major negative impact on an insurance score.
· Use credit wisely. High outstanding debt can affect an insurance score.
· Apply for and open new credit accounts only as needed. Maintain only the minimum number of credit cards and other credit accounts necessary.
· Remember that the longevity of an account (the amount of time you’ve had it) is considered part of your credit history.