Kanetix Forum

Your article, "Insurance Rates and Your Credit Score," by Kade Phillips misinterprets FICO credit scores as it relates to insurance.

Credit-based insurance scores are very different from credit scores. Insurance scores are designed to predict insurance losses; credit scores predict the likelihood of delinquency or non-payment of credit obligations. The credit-based scoring process relies on information in a person's credit record, with particular emphasis placed on those elements associated with credit management patterns proven to correlate most closely with insurance risk. Such factors include outstanding debt, length of credit history, late payments, collections and bankruptcies, as well as new applications for credit.

Credit-based insurance scores are one of many factors used by insurers to predict who is more likely to pose an increased risk of filing a claim. Insurers use credit-based insurance scores in a variety of ways. Some companies use it for ratemaking; some for underwriting; others do not use it at all. The diversity keeps the market competitive and gives consumers more choices.
Sincerely,

Loretta L. Worters
Vice President
Insurance Information Institute

Thank you for your comment and for bringing this to our attention. We will notify the author of this inaccuracy and, where possible, make a correction.