A happy couple sitting in front of an insurance agent who is holding a pen and clipboard full of documents.

What Is a Credit-Based Insurance Score?

Updated April 4, 2024 . AmFam Team

From your claims history to your age, you’re probably aware of some of the factors used to determine your insurance rates. But did you know that in some states, your credit information is also taken into account?

At American Family Insurance, we’ve found that the use of credit-based insurance scoring allows us to offer lower premiums to many customers who otherwise would pay more for their insurance.

Take a look at some key questions we’ve answered to help you better understand how a credit-based insurance score is used to calculate your rate.

Two business associates sitting together and talking.

What does your credit have to do with insurance?

Credit-based insurance scoring is very common in the insurance industry, and it’s been proven to effectively predict the likelihood of future insurance claims.

While having a good credit-based insurance score doesn’t necessarily mean you’re a good driver or a more responsible homeowner, research has shown that someone with a good credit-based insurance score generally files fewer and/or less expensive claims.

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Definition of a Credit-Based Insurance Score

Like your credit score, a credit-based insurance score is a three-digit number that is calculated using information from your credit report. It provides an assessment of your insurance risk at a particular point in time and helps American Family forecast your future performance as a customer.

Here’s some info used to calculate your score:

  • Payment history (e.g., credit cards, retail accounts, installment loans, mortgages, etc.)
  • Amounts owed (i.e., the total amount owed on all accounts listed on your credit report)
  • The average age of accounts listed on your credit report
  • The number of applications for new credit and accounts opened in the past 12 months
  • Types of accounts listed on your credit report (e.g., bankcard, auto loan, mortgage, etc.)

It’s important to note that no one piece of information will determine your ultimate credit-based insurance score. Also, your score doesn’t consider your race, gender, age, income, nationality, religious affiliation, disability or marital status, as this is prohibited by law.

A person holding at credit card in front of an open laptop and bills.

What is the difference between a credit-based insurance score & a credit score?

Though each score evaluates information from your credit report, a credit-based insurance score and credit score are separate entities.

Credit score: Your lending institution uses your credit score to determine how likely you are to pay back your debt and at what interest rate.

Credit-based insurance score: Your insurance company uses your credit-based insurance score to assess how likely you are to file a claim. They’ll use the score with other factors to determine your rate.

Keep in mind, though seemingly connected, your credit-based insurance score and credit score aren’t meant to be compared. They simply are both gathered with information from your credit report.

An insurance agent showing a document to an interested couple.

Will American Family Insurance’s credit report request affect your score?

Nope. American Family Insurance will be listed in the inquiry portion of the credit report, but your credit won’t be negatively impacted. Also note that our inquiry is not disclosed to anyone other than TransUnion and yourself.

A person holding an empty wallet above a stack of bills.

What if you have a special circumstance that has negatively impacted your credit history?

If your credit history has been impacted by an extraordinary life event, such as a medical crisis, temporary loss of employment, divorce, the death of an immediate family member or identity theft, we’ll take the special circumstance into consideration so it doesn’t negatively impact your rate. You may be required to provide documentation of the special circumstance. Your agent can provide more information if you’d like to learn more.

A person sitting at their desk, balancing their checkbook.

What should you do if the information on your credit report is wrong?

Unfortunately, American Family Insurance won’t be able to correct the information on your credit report. If you find an error, you’ll need to contact TransUnion directly to address the issue.

The Fair Credit Reporting Act (FCRA) allows the credit reporting agency a ‘reasonable period of time,’ generally not to exceed 30 days, to investigate consumer-disputed items. Once TransUnion has investigated and updated your report, go ahead and notify your agent of the correction so we can rate your policy with the most current information.

Some corrections may have little or no impact on your credit-based insurance score or policy premium.

A credit report displaying an excellent credit score.

How can you get a copy of your credit report?

American Family obtains your credit-based insurance score from TransUnion. To request a copy of your credit report from TransUnion, you can call or go to their website using the information below:

Call: (888) 780-4854

Online: www.TransUnion.com (Opens in a new tab)

A couple lying on their floor together in front of a laptop while holding a credit card.

How can you improve your credit-based insurance score?

If you want to improve your credit-based insurance score, keep in mind that it takes time, and often there is no quick fix. Your score reflects credit payment patterns over time with more emphasis on recent information, so be diligent and follow these tips:

  • Pay bills on time
  • Keep balances low on credit cards and other revolving credit products
  • Apply for and open new credit accounts only as needed
  • If you need a loan, do your rate shopping within a focused period of time, such as 30 days
  • Check your own credit reports regularly, and before applying for new credit, to be sure they are accurate and up to date

Still have questions? Connect with an American Family Insurance agent today.

This article is for informational purposes only and based on information that is widely available. This information does not, and is not intended to, constitute legal or financial advice. You should contact a professional for advice specific to your situation.

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