Credit Use in Auto Insurance

 

Credit Use in Auto Insurance

Like many consumers, you may be wondering what your credit information has to do with auto insurance. Here's an overview of how and why Drive—and most other insurance companies—uses credit when determining rates. While specific state laws govern our use of credit, this is a general overview of our practices.

 

 

What is an insurance score?
An insurance score is a score calculated from information on your credit report. Credit information is very predictive of future accidents or insurance claims, which is why we, and most insurers, use this information to help develop more accurate rates.

Each insurance company has its own method for evaluating this credit information. At Drive, we develop our method by analyzing the following data from people we have insured:

  • · Accident and insurance claim history
  • · Credit report information
  • The results of this analysis tell us what credit information will help us predict how likely you are to have a future accident or insurance claim. We assign a value to each predictive credit factor and add up the values to calculate your insurance score. The lower your score is with us, the better.

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    Are insurance scores the same as credit scores?
    No. A credit score is based on your ability to repay amounts you have borrowed. An insurance score predicts the likelihood of you becoming involved in a future accident or insurance claim—it is based on information gathered from policyholders with similar credit characteristics who have had previous claims with us.

    When banks and other lenders determine credit scores, they may factor in your income, job history and other matters that might affect your ability to repay a loan. Banks also can deny you a loan based on your credit score. We do not consider income or job history, and we won't deny you a policy based on your insurance score.