Although some insurance companies still look at your actual credit report, most companies now use a "credit score" or an "insurance score." A score is a snapshot of your credit at one point in time.
Insurance companies and entities that have developed credit scoring models use several factors to determine credit scores. Each factor is assigned a weighted number that, when applied to your specific credit information and added together, equals your three-digit credit score ranging from 0-999, depending on the insurance company and the credit scoring model used. Generally, the higher the number, the more financially responsible the consumer.
Following is a list of the more common credit factors used in determining credit scores:
Major negative items - bankruptcy, collections, foreclosures, liens, charge-offs, etc.
Past payment history - number and frequency of late payments; days elapsed between due date and late payment date.
Length of credit history - amount of time you've been in the credit system.
Home ownership - whether you own or rent.
Inquiries for credit - number of times you've recently applied for new accounts, including mortgage loans, utility accounts, credit card accounts, etc.
Number of credit lines open - number of major credit cards, department store credit cards, etc. that you've actually opened.
Type of credit in use - major credit cards, store credit cards, finance company loans, etc.
Outstanding debt - how much you owe compared to how much credit is available to you.
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Although some insurance companies still look at your actual credit report, most companies now use a "credit score" or an "insurance score." A score is a snapshot of your credit at one point in time.
Insurance companies and entities that have developed credit scoring models use several factors to determine credit scores. Each factor is assigned a weighted number that, when applied to your specific credit information and added together, equals your three-digit credit score ranging from 0-999, depending on the insurance company and the credit scoring model used. Generally, the higher the number, the more financially responsible the consumer.
Following is a list of the more common credit factors used in determining credit scores: