If you’re like most Americans, you’ve probably got a ballpark idea of your credit score. But what about your auto insurance score?
Say Insurance is betting that you don’t know about this three-digit score with a similar impact on your financial life. As part of its “car insurance made simple” mission, the division of Shelter General Insurance Company is helping policyholders understand how actuaries use auto insurance scores to set rates and provide discounts.
What Your Auto Insurance Score Says
Just as your credit score suggests to lenders how likely you are to repay a debt, your auto insurance score helps signal to insurance providers how likely you are to have a claim. But while many financial services firms help customers understand their credit score, Say Insurance is among the industry’s first providers to share insurance scores.
Why is Say Insurance sharing what had, until recently, been something of an industry secret? “Clarity and transparency are our company values,” explains Marc Deiter, director of Say Insurance. “We couldn’t honestly say we’re living up to them if we didn’t give that visibility to our customers.”
Say Insurance uses insurance scores, which are calculated by LexisNexis, when aligning coverages and costs. To calculate an auto insurance quote, Say considers factors such as an applicant’s insurance score, driving record, Comprehensive Loss Underwriting Exchange (CLUE) report, and risk-related characteristics.
“Think of your auto insurance score as our way of getting to know you as a policyholder,” Deiter suggests. “We know driving records don’t tell the whole story. Your insurance score fills in the financial blanks.”
Those “financial blanks” aren’t necessarily the same ones that factor into your credit score, though. Whereas your credit score takes into account factors like your debt-to-income ratio, work history, and repayment ability, your auto insurance score is less concerned with what’s in your financial accounts and more interested in how you interact with them. Your insurance score looks at metrics like age of financial accounts, payment history, and credit utilization.
There’s also, Deiter points out, one other important difference between insurance scores and credit scores. “Lenders can deny you a loan if your credit score is poor, but we’ll never refuse you coverage based on your auto insurance score,” he says.
Improving Your Insurance Score
Just because Say Insurance doesn’t decline prospective policyholders based on their insurance score doesn’t mean there’s no reason for customers to raise it. Because customers with lower auto insurance scores represent greater risks than other policyholders, Say and others often charge higher monthly premiums to individuals with lower scores.
So where should you start? Begin by checking your insurance score. Although Say Insurance provides the figure alongside all its auto insurance quotes, it also offers a free online tool so anyone can check their score.
8 Ways to Improve Your Auto Insurance Score
So now that you know about the importance of your auto insurance score, what can you do about it? Quite a bit, it turns out.
In some ways, you can treat your auto insurance score just like your credit score. Both are heavily tied to your financial history and ability to pay off debts reliably, and both can be improved using similar methods.
The equations that your determine your credit score and auto insurance score are completely different, but they pull information from largely the same sources. By focusing in on the most influential factors for your credit, you can target the places most likely to improve your auto insurance score in the process.
There is no magic bullet for giving your auto insurance score a boost, but here are some things you can do now to help your score out in the long term:
1. Get your credit report — and correct any errors.
One of the easiest ways to give your score a boost is simply by making sure it’s accurate. Up to 25 percent of credit reports contain errors, and those errors could be costing you. You can request a free credit report once a year and review it for any inconsistencies. When insurers are gauging your credit history, you want them to be sure they’re not using potential errors while weighing your auto insurance score.
2. Avoid opening too many new credit accounts.
The more open credit accounts you have, the more liability there is that they might go unpaid. Insurers like to see that you don’t have too many credit cards constantly requiring payments from you. A healthy number of credit accounts could mean fewer outstanding debts that could pose problems down the line, which can positively impact your auto insurance score. Make sure you’re in good standing with any accounts you end, however, as accounts closed in good standing are highly likely to increase your auto insurance score.
3. Pay bills on time.
Insurers are desperate for customers who have a track record of paying their bills on time. Ensure that you’re making the minimum payments on all of your bills in order to keep your auto insurance score as high as possible. As important as it is to stay on top of all debts; paying your bills on time is important for seeing the best results as soon as possible.
Consider options like a billing schedule or calendar. Having a set understanding of what you need to pay and when makes it much easier to completely manage your debt payments. You can also adjust your calendar so that you’re contributing more to your outstanding dues, paying off your accounts even faster. When loans are paid off faster than mandated, your auto insurance score will take notice.
4. Eliminate debts.
A debt-free customer is a customer more likely to pay their bills, end of story. Making the minimum payments is important, but contributing even more to debt elimination can give your auto insurance score a boost. A clean account sheet looks good to insurers, and anything you can do to make that a reality goes a long way in keeping your score high.
5. Don’t max out.
Keep all credit cards and other lines of credit from reaching their maximum limit. Insurers and creditors don’t like to see people requiring the use of their entire available credit, so it’s best to keep spending somewhere at or below 75 percent of your absolute maximum.
While it’s important to only maintain lines of credit you use comfortably and regularly, one way of keeping your credit from getting maxed out is by simply expanding your credit limits. Contact your credit cards and ask for an increase in your monthly limit — that way, you can utilize a smaller proportion of your overall credit allotment without having to change spending habits. Keeping your credit usage low shows that you put responsibility first when it comes to your finances.
6. Stick with your provider.
In addition to keeping an auto insurance policy as long as possible, it can also be beneficial to stick with one insurance provider. Some providers, Say Insurance among them, increase your auto insurance score the longer you remain a holder of their policy. Loyalty to a certain insurance provider can be highly beneficial to your score, but it’s important to ask your provider if they boost your score over time. If not, it might be time to look for an insurance company that does.
7. Diversify your credit.
Your credit score is closely tied to your auto insurance score, and maintaining a high level of credit diversity is key to maximizing both. If a significant portion of your credit goes through credit cards, remember that things like well-managed home, car, and student loans all show a strength of credit likely to bump your auto insurance up a little higher.
8. Be patient.
If your auto insurance score is being dragged down by some hiccups in your financial history, don’t panic. While it’s never fun to have past mistakes affect the present, nearly everything gets wiped from your credit report if you wait long enough. All you can do in the present is make sure that you’re using your credit carefully and sustainably.
Shorter credit histories are also more likely to lower auto insurance scores than longer ones. While waiting can feel fruitless, it actually does have great potential to boost your score in the long run. If you keep that up long enough, you’ll undoubtedly see your auto insurance score go up over time.
As important as it is to be aware of your auto insurance score, it’s equally important to know how you can improve it. Blindly trying to upgrade your score is likely to do more harm than good, so it’s important to know what you’re doing and why. Taking small steps like these can go a long way towards lowering the overall cost of your auto insurance now and well into the future.
If your score is between the neutral mark of 670 and the maximum of 997, great news: You’re a better-than-average bet for insurers. But if your score is 670 or less — and particularly if it’s lower than 500 — there are a few things you can do to improve it.
First, request your credit score report, which you’re allowed to access for free once per year from each of the three nationwide credit reporting companies. Check for inaccuracies, such as supposedly late payments you’re sure you made on time, and dispute any you find. If you can’t dispute a penalty, rest assured that it will eventually fall off your record. Then, focus on paying down credit balances and making on-time payments moving forward.
Beware, though, that the process of strengthening your auto insurance score takes time. That’s why Say Insurance intentionally reduces its impact on policyholders’ plans. “The insurance industry should know better than anyone that accidents happen,” notes Deiter. “Particularly for our loyal customers, we try to level the playing field.”
Although Deiter admits that Say Insurance leans less on auto insurance scores after the initial quote, he points out that Say adds points in 50-unit increments with each renewal. After three years with Say Insurance, for instance, a customer’s Say score could exceed their LexisNexis insurance score by 300 points.
Two Scores, One Picture
Although it’s certainly possible to have a high credit score and a low auto insurance score, or vice versa, the two typically track together. Financial responsibility is so correlated with responsibility on the road that drivers with poor credit scores sometimes pay triple what their peers do.
Deiter adds that by showing consumers their auto insurance score, Say Insurance hopes to help them take control of their wider financial life. “A good driving record is only half the story,” he says. “We want everyone to see how their financial actions impact other areas of their life, like their insurance policies.”
You might not know your auto insurance score, but insurers sure do. Given its importance on your financial life, it’s time you found out — wouldn’t you say?
Updated on Aug. 7, 2019.