How Scoring Works

FICO^® Insurance Scores use the credit information from your credit report to assess whether you're more or less likely, compared to other consumers, to have insurance claims in the near future that will result in losses for the insurance company.

To develop the formula or "model" for credit-based insurance scores, FICO uses a rigorous statistical methodology and applies it to depersonalized credit data for millions of consumers along with data on many millions of dollars in insurance premiums and losses. As they develop the scoring model, FICO scientists use advanced technology to empirically determine the correlation of hundreds of credit variables (for example, the number of times a consumer has been reported 60 days late by a creditor), with later insurance claim performance.

Higher insurance scores indicate lower risk to insurers.

Only those credit variables determined to be most predictive of future insurance losses are used in FICO models. The finished models are installed at the credit reporting agencies for their use in calculating scores for insurers. To ensure higher accuracy, FICO builds separate models for the major forms of both property insurance and auto insurance.

Insurers who choose to add credit to the mix of information they evaluate when making underwriting decisions can, in most states, purchase an insurance score from a credit reporting agency. When an insurer orders a score, the credit reporting agency runs that consumer's credit report through the FICO scoring model. It sends the resulting score to the insurer along with the associated "reasons," which are the major factors in the person's credit report that kept the score from being higher.