Another Score to Watch: Your Insurance Bureau Score

Insurance Score

By now, you’ve probably spent the majority of your adult like fretting over your credit score. You know that scary number that determines whether you’re eligible for a home, car or any type of personal loan? Well, it turns out that in the insurance world, there’s another type of score that you should fear just as much. If you’ve not already been formally introduced, here’s your chance to meet the insurance bureau score.

What is the Insurance Bureau Score?

Your insurance bureau score is an insurance rating is a snapshot of your insurance risk as determined by the information contained on your credit report. Basically, the score is offered as a convenience to insurance companies as it allows them to check how much of a risk you are without having to go find your credit score, and it definitely affects your insurance rates.

So if you have decided to take on an auto insurance policy or get yourself some homeowners insurance, you can bet that the company will be checking your insurance score to determine how much you will be charged.

What Factors Determine the Insurance Bureau Score?

According to Fair Isaac, the factors that determine your insurance bureau score are the same as those that determine your FICO score. But if you’re not sure what they are, here’s a basic snapshot:

  • Outstanding debt
  • Credit history length
  • New applications for credit
  • Types of credit you use
  • Late payments, collections, and bankruptcies

This means that not only does your insurance score reflect what has occurred in your financial life in the past, but it is also updated as your credit score is updated. This could work for or against you depending on your financial choices.

What Is Not Factored Into the Score?

Just as there are some factors that will not play a role in determining your credit score, there are factors that will not determine your insurance bureau score. Some of these factors include your:

  • Age
  • Ethnic group
  • Marital status
  • Nationality
  • Religion
  • Gender
  • Income
  • Familial status
  • Handicap
  • Address

It’s good to keep in mind that while the above information is not to be used to determine your insurance score, some could still be used by each individual insurance company when deciding how much to charge for your insurance quotes.

How Can I Improve My Score?

Unfortunately, unlike your credit score, you are not allowed to look at your insurance bureau score. However, since you can get an idea of what goes into your score by checking your credit score, you’re not totally in the dark.

Just a few ideas on ways to increase your insurance score include:

  • Paying your bills when due: It’s important to pay your bills on time every month to keep your credit report intact and, as a result, keep your insurance score in good standing.
  • Keep good debt-to-credit ratio: Your credit utilization ratio determines how well you’re able to manage the credit that’s been extended to you. By keeping your ratio at around 20 percent, you show that you know how to use your credit, but also pay the balance off.
  • Apply for credit in moderation: If you apply for too much credit in a short span, your creditworthiness drops. For this reason, it’s best to apply in moderation.
  • Avoid collection accounts and public records: If you’ve failed to pay due accounts, it’s best to get them straightened out before they show on your credit report as collection accounts or public records. These cause your credit score to plummet, and in turn will cause your insurance score to do the same.

Of course, the insurance score is one of many factors that determine your auto insurance rates, as well as other insurance rates. However, it’s great to know, not only that it exists, but with careful management of your finances, it can have a positive effect on how much you’re charged the next time you purchase an insurance policy.