Is an Insurance Score the Same as My Credit Score?

WV & OH ONLY

"My credit score looks fine on my bank's app. Is that the same score a car insurance company uses?"

This one confuses nearly everybody, and it's not your fault.

No, an insurance score is not the same as your credit score, even though both are built from the information in your credit report. A credit score estimates whether you'll repay a loan, and an insurance score estimates how likely you are to file a claim. The number on your bank's app isn't what an insurance company is looking at.

One simple number would make life easier for all of us. Since there isn't one, we go find the best rate for you ourselves.

There isn't one insurance score. Different companies can use different models and give the result different weight. We can go through 13 companies, which is the only practical way to see how your credit plays with each of them.

Straight up, I'd like to quote you. This one's hard to look up on your own. The real answer shows up when the companies price you.

WV & OH ONLY

The National Association of Insurance Commissioners puts it simply: a traditional credit score predicts whether someone will repay a loan, and a credit-based insurance score estimates the likelihood of an insurance claim. The Federal Trade Commission says insurance scores grew out of traditional credit scores.

Same raw material. Different question.

The NAIC's consumer article gives FICO's breakdown for its insurance scores:

That's one company's model, published in general terms. Others can differ, and how any insurance company uses the result is up to that company, within state rules.

That same article lists things that aren't used, including race, color, national origin, religion, gender, marital status, age, income, occupation, employment history and where you live.

People are often surprised by income. A person with a modest paycheck who pays everything on time isn't marked down for the size of that paycheck in that model. It's about how credit gets handled.

Age and where you live can still affect your insurance price. They just come in through other parts of the rating, not through this score.

It can happen. The NAIC says insurance scores may weigh credit information differently from credit scores. So two scores built from the same report can land in different places. I wouldn't panic about this, and I wouldn't assume it either.

No. The NAIC calls it one factor among many, alongside things like ZIP code, driver age, vehicle details and annual mileage. An excellent score won't undo a bad driving record, and a weak score won't necessarily price you out everywhere.

In West Virginia, Bulletin 20-12 requires the company, rating organization or model provider to test and certify that the scoring isn't used in an unfairly discriminatory way and that it's an accurate, statistically credible predictor of loss. The Commissioner can ask to see the actual scoring algorithm. A company also can't switch its source of scores or its model more than once a year.

In Ohio, insurers have to establish that the credit history and scores they use are valid risk characteristics.

The public doesn't get to see the formulas. Regulators can ask.

I can't give you a number that would mean anything. The scales aren't the same from one model to the next, and each company decides what to do with the result. A score that gets one company's best price may be ordinary at another.

West Virginia requires a company to tell you, on the application or when it's taken, that it may get credit information. If the score costs you money, federal law says you get a notice that names the reporting company and tells you about your right to a free report and to dispute it.

That's the kind of thing people miss, and it's a good example of the small mistakes that cost real money.

The score on your phone is only half the story. Let me go find the other half.

WV & OH ONLY

Next in the series: Part 14, My Credit Got Better. Will My Rate Go Down?