Car Insurance and Store Cards

[Subexistence]

I saw in theseforums that having more store cards increases car insurance rates. However I couldn't find any information on this using Google. Could someone explain what's going on here.

Edit:link to creditkarma insurance scores https://www.creditkarma.com/myfinances/scores/insurance

[Anonymous]

The abbreviation you may be looking for is CBIS, which stands for Credit Based Insurance Score.  Here is an article about CBIS:

http://www.naic.org/cipr_topics/topic_credit_based_insurance_score.htm

There are two major CBIS systems that are in large use today.  One is made by Lexis Nexis and is based on Equifax data, if I remember right.  The other is made by TransUnion. 

The TU CBIS score is available free at Credit Karma.  It is not the TU Vantage score that you can find very quickly at Karma, alongside the EQ Vantage score.  You'll have to scout around on Karma to find the insurance score, but it is there.  Karma will show you two flavors: one for Auto and the other for Home insurance.

The Lexis Nexis scoring system is not available free any place I know of and it is more widely used than the TU CBIS system. 

The two scoring systems I have just mentioned are based solely on your credit report: they do not take into account factors like your driving record, your age, the make and model of car you drive, or your street address and zip, all of which are factors used by the insurance provider in setting your premium.  It's just that, in addition to all those factors, an insurance company may also use a credit score.  The LN CBIS score is fairly common, next is probably the TU CBIS system, but an insurance issuer could conceivably use a common FICO score like FICO 8 classic (say).

The LN and TU CBIS systems are based on many of the same scoring factors as a FICO score, and thus having no derogs (lates, collections, chargeoffs, etc.), having a low CC utilization, having a high age of oldest account and AAoA, having few inquiries and no recently opened accounts, and a mix of credit -- all these help your CBIS scores.

But in addition to the things FICO looks at, the two CBIS systems look at their own additional set of concerns.   Here are a series of questions, for which FICO does not care what the answers are, but if the answer is Yes then it counts against you for the two CBIS systems I mentioned:

Do you have an account with Pep Boys or Auto Zone?  (etc.)

Are some of your revolving accounts store cards?

Is your oldest account an installment loan rather than a revolving account?

Is your average credit limit < $10,533?  (FICO doesn't care about ACL at all.)

There are also areas of shared concern that FICO is more lenient with.  The two CBIS systems are much more freaked out by inquiries and new accounts, for example. 

If you'd like to look through all the different reason codes for the LN system, you can do that here:

https://consumer-solutions.custhelp.com/app/answers/detail/a_id/2523/~/how-do-i-learn-more-about-sco...

[Subexistence]

Thank you so much for clarifyinig! Do you know if this also applies to other insurance like house insuarnce, health insurance,life insurance, etc?

[Anonymous]

You may also find this thread interesting:

http://ficoforums.myfico.com/t5/General-Credit-Topics/quot-Credit-based-insurance-score-quot/td-p/47...

[Subexistence]

Edit:Not proud to say I got an 820 creditkarma! Also does the Lexis Nexis require 6 months to generate like the FICO score?

[Anonymous]

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@Subexistence wrote:

Thank you so much for clarifyinig! Do you know if this also applies to other insurance like house insuarnce, health insurance,life insurance, etc?

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Home insurance for sure.  (Though the LN home insurance model is no doubt different from its auto insurance model.)

My guess is that health insurance policies cannot be based on credit reports in any way -- federal and/or state law probably prohibits this.

Some states prohibits the use of CBIS for auto insurance as well.  I think it is three or four of them.

[Anonymous]

An 820 is not a good score in the TU Insurance model, sorry to say.  Here is a post from the CK site from our very own Thomas Thumb.  I would scout around on the CK site and see if you can determine whether these are still the same category ranges.  (TT's post is from 15 months ago.)

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Credit Karma's free credit based Auto insurance score comes directly from TransUnion (TU). I purchased my score direct from TU and it matches what CK lists. Listed below is an approximate rating breakdown by category [score range 150 to 950].

TU Auto insurance score .... Category Rating

895 and above .........................Very Good

860 to 894 ............................... Good

825 to 859 ................................ Fair

760 to 824 ................................ Poor

759 and below .......................... Very Poor

https://www.creditkarma.com/question/what-is-a-good-auto-insurance-score

[Subexistence]

whoops lol

[Subexistence]

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@Anonymous wrote:

An 820 is not a good score in the TU Insurance model, sorry to say.  Here is a post from the CK site from our very own Thomas Thumb.  I would scout around on the CK site and see if you can determine whether these are still the same category ranges.  (TT's post is from 15 months ago.)

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Credit Karma's free credit based Auto insurance score comes directly from TransUnion (TU). I purchased my score direct from TU and it matches what CK lists. Listed below is an approximate rating breakdown by category [score range 150 to 950].

TU Auto insurance score .... Category Rating

895 and above .........................Very Good

860 to 894 ............................... Good

825 to 859 ................................ Fair

760 to 824 ................................ Poor

759 and below .......................... Very Poor

https://www.creditkarma.com/question/what-is-a-good-auto-insurance-score

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I have 872 home insurance score. For anyone wondering how to access it here is the linkhttps://www.creditkarma.com/myfinances/scores/insurance

CreditKarma states house insurance factors in age of oldest account and total credit limit. These are in contrast to the traditional average age of accounts and utilization only calculation of traditional scores.

[Anonymous]

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@Subexistence wrote:

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@Anonymous wrote:

An 820 is not a good score in the TU Insurance model, sorry to say.  Here is a post from the CK site from our very own Thomas Thumb.  I would scout around on the CK site and see if you can determine whether these are still the same category ranges.  (TT's post is from 15 months ago.)

=======

Credit Karma's free credit based Auto insurance score comes directly from TransUnion (TU). I purchased my score direct from TU and it matches what CK lists. Listed below is an approximate rating breakdown by category [score range 150 to 950].

TU Auto insurance score .... Category Rating

895 and above .........................Very Good

860 to 894 ............................... Good

825 to 859 ................................ Fair

760 to 824 ................................ Poor

759 and below .......................... Very Poor

https://www.creditkarma.com/question/what-is-a-good-auto-insurance-score

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I have 872 home insurance score. For anyone wondering how to access it here is the linkhttps://www.creditkarma.com/myfinances/scores/insurance

CreditKarma states house insurance factors in age of oldest account and total credit limit. These are in contrast to the traditional average age of accounts and utilization only calculation of traditional scores.

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You are right that FICO does not consider credit limits at all in any of its models -- aside from CC utilization. 

But actually Age of Oldest Account is a very important factor for FICO.  Along with Age of Youngest Account and Total Number of Accounts, it is one of the three factors used in assigning people to one of the 8 clean scorecards -- a very important thing indeed. 

PS.  Like you, my home insurance score (903) is much better than my auto score (855).  As a point of reference, my TU FICO 8 Classic score is 808, which is far better than either of my CBIS scores.  (A FICO 8 of 808 is a much higher percentile score than the 903 home insurance score.)  Thus you can see how much the Auto Insurance score is weighted with concerns different from the traditional FICO model. 

And I have no store cards, no finance company accounts, no auto store accounts, and a very high Average Credit Limit and Total Credit Limit.  And still my Auto score is a lot worse!  TT speculates that this may have to do with the tremendous emphasis places by the CBIS models on new credit.  I have opened a lot of new credit cards in the last 18 months.