What's the difference between a Credit-Based Insurance Score and a FICO credit score?

They’re different, in that they predict different things. Credit scores measure creditworthiness, while insurance scores measure the likelihood of insurance risk. There’s really no comparison between the two.

What does credit have to do with insurance?

Studies by government insurance regulators, universities, independent auditors, and insurance companies show that a person’s credit history is a strong predictor of risk. In July 2007, the Federal Trade Commission released its study http://www.ftc.gov/opa/2007/07/facta.shtm that said credit histories are “predictive of the number of claims consumers file and the total cost of those claims,” and “... also may make the process of granting and pricing insurance quicker and cheaper, cost savings that may be passed on to consumers in the form of lower premiums.”

How is credit information applied to the Credit-Based Insurance Score?

A model was developed by an analytics company that predicts the likelihood of claims, and is based in part on credit history. This model has been validated all over the nation and is recognized as highly accurate in predicting the likelihood of claims. Your insurance score, combined with many other factors, is calculated to determine the premium you pay.

Is a Credit-Based Insurance Score the only factor used to determine premium?

No. Auto and homeowners premiums are based on many factors; the insurance score is just one of those. Your auto premium is also based on things like driving record, past claims, the type of vehicle you drive, and where you live. Your homeowners premium is based on things like past claims, type of home construction, distance to fire stations and fire hydrants, whether you have smoke detectors and alarm systems, and the cost to replace your home.

Can every factor in my credit history be considered in calculating the Credit-Based Insurance Score

State insurance laws commonly limit what type of credit history information may be used to calculate Credit-Based Insurance Scores. Any prohibited factors (for example, the number of credit inquiries made, any credit history based on collection accounts identified with medical industry codes, or the use of a particular type of credit card, charge card, or debit card), would not be considered in calculating a Credit-Based Insurance Score.

Do all insurers use Credit-Based Insurance Scoring?

A vast majority of auto and home insurers use Credit-Based Insurance Scores.

What is my insurance score?

PEMCO doesn’t disclose your actual credit-based insurance score because it causes customers to immediately compare it with their FICO score, which is not the same. The insurance score is different from what most consumers expect, so it causes undue concern. For example, if you didn't receive the best possible credit-based insurance score, in almost all cases your rates are still favorably impacted by credit-based insurance scores. To learn more about insurance scores, go to: www.insurancescore.com.

Where does PEMCO get the Credit-Based Insurance Score for its customers?

We use a third-party vendor, Myriad Development, to obtain the insurance score. Credit-Based Insurance Scores were developed by FICO, the same company that provides most credit scores.

What main areas of my credit history affect my Credit-Based Insurance Score?

Five main categories are used from your credit report: payment history, total indebtedness compared to available credit, length of credit history, new credit, and types of credit in use. To learn more about how an insurance score is calculated, go to: www.insurancescore.com.

I have an excellent credit score. Why don’t I get the best rates?

Your credit score is a predictor of creditworthiness and therefore not relevant in assessing the likelihood of insurance risk. However, the credit-based insurance score is a predictor of claim activity and is one of many factors used to give you the best rate.

Does PEMCO see my credit report?

No, we don’t get a copy of your credit report. We only receive your credit-based insurance score.

How can I get a copy of my credit report?

If you don’t receive the best rate with PEMCO because of your credit history, you have a right to receive a free copy of your consumer report from Equifax if you request it within 60 days of the notice we send about your rate. You can request your report from Equifax through its secure website, www.equifax.com/fcra. Select the radial button that states “Denied credit, insurance or change in credit limit.” Equifax provides your credit report along with a confirmation number you can use in communicating with them.

Additionally, you are entitled under the Fair Credit Reporting Act to a free credit report from each of the three nationwide consumer credit reporting companies – Equifax, Experian, and TransUnion – once every 12 months to confirm the accuracy of the information placed in your report. You can order your annual free credit report from the three credit reporting companies at the same time through a central website at http://annualcreditreport.com or by calling toll free 1-877-322-8228, or mailing a request via U.S. Postal Service to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

I’m not the only person covered under my policy. Whose insurance score is used?

The first insured person listed on your policy is the one whose insurance score is used. Usually, the choice of whose name appears first was decided at the time the policy was purchased.

What steps can I take to safeguard my credit report if I’m a victim of identity theft, or suspect I’m a victim?

We encourage our customers to take advantage of our free service called PEMCO ID Smart, which connects you with a fraud specialist who will guide you through the resolution process, working with you for as long as it takes to resolve the issue.

What steps can I take to safeguard my credit report if I’m in the military and going on active duty?

We encourage our customers to take advantage of our free service called PEMCO ID Smart, which connects you with a fraud specialist who can help you with concerns you have about being away on extended stay, including active duty.

Can my insurance score be reordered at my request?

Yes, you may ask us to re-rate your policy with a current Credit-Based Insurance Score no more than once each policy period.

What can I do to improve my insurance score?

Consumers who focus on the five main categories considered in their credit report (See “How does my credit history affect my Credit-Based Insurance Score?”) can improve their insurance scores over time. To learn more about insurance scores, go to: www.insurancescore.com.

What if there's an error on my credit report?

Under the Fair Credit Reporting Act, you have the right to dispute the accuracy or completeness of your report. You'll need a copy of your report and a confirmation code that comes with it before Equifax can talk with you in any detail about your report. If Equifax changes your report, they'll send you a confirmation notice. Once you receive that confirmation, please call PEMCO Customer Service at 1‑800‑GO‑PEMCO, and we'll then reorder your insurance score. If the new score results in a lower rate, we'll change it retroactive to the beginning of your current policy term.

What is an inquiry?

An inquiry is an entry on your credit report showing that someone asked to view your report. The inquiries section contains a list of everyone who accessed your credit report within the past two years, and when they received it. This also may include any company that ordered a credit score or a Credit-Based Insurance Score. Your credit report includes inquiries where you requested credit (such as a mortgage or auto loan) and when you were offered credit (such as pre-approved credit offers in the mail).

How do inquiries affect Credit-Based Insurance Scores?

With few exceptions (usually limited to inquiries initiated by the consumer in the course of taking out a loan), inquiries are not allowed as factors to be considered in calculating Credit-Based Insurance Scores. See www.insurancescore.com for more details.

Will the insurance inquiry on my credit file impact my FICO credit score?

Insurance inquiries do not affect credit scores in Washington State. FICO, which holds about 90% of the credit-scoring market share, says insurance inquiries do not impact credit scores. To learn more go to: www.insurancescore.com.