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Credit scores are being used to determine vehicle insurance rates

For a number of years now, you have heard that insurance companies are considering your credit history and score when determining your insurance rates. This is especially true for vehicle insurance rates. As an example, Progressive Insurance Company recently settled a lawsuit involving the use of credit scores in determining various insurance rates going back to 1997. However, the lawsuit had nothing to do with their use of your credit information, but rather the fact that they did not advise consumers that their credit reports were being used, that the credit scores were affecting the quoted rates/premiums, and that the consumers had the right to review a free copy of their credit report.

Progressive customers now receive a Notice of Underwriting Action as part of their policy renewal package. It is intended to clarify their use of credit information to determine insurance rates and the consumers' rights to request a copy of their credit report as well as a premium review if incorrect information was used to make the determination. The form of the Notice to be used varies based upon state legal requirements and also whether it is part of a rate quote (potential new customer) or a premium review (for existing customers). If your policy request is denied, this Notice may be called an Adverse Action Notice.

What is even better than the Notice is that Progressive now includes the results of the personal insurance credit inquiry so that their customers know exactly where they stand. See if your latest vehicle insurance policy contained any of these items.

An example of this report is presented below.

Personal insurance credit inquiry for <Full Customer Name>

The Progressive County Mutual Ins. Co. uses credit information in addition to other information to determine your rate. Here's how it works:

  • We calculate your insurance credit score based on your credit information. If yours is not available and you are married, or if your spouse has recently applied with us, your spouse's information may be used instead. References in this report to "your" credit information refer to <Full Customer Name>'s credit history.
  • When you first apply for insurance we use your insurance credit score and other underwriting information, such as your prior insurance, to group you with other Progressive customers who have similar characteristics. That grouping, along with a number of rating factors such as your driving record, help us predict the likelihood you'll have an accident, which we use to determine your premium.

We obtained your credit information from EXPERIAN. For a free copy of your credit report, call EXPERIAN at 1-888-397-3742. If you have any questions or need additional information about this insurance credit inquiry report, please contact our Credit Information Team at 1-800-822-4763, Monday through Friday, from 8:00 am to 8:00 pm EST.

Your credit results

In connection with this renewal, we reviewed your credit score. We are using this information and adjusted your rate accordingly. Rating and other factors may also influence your premium, and our practices may also change over time. Details on your new credit score results are below.

Your insurance credit score puts you in the 93d percentile. This means that you have a better insurance credit score than 93% of customers who received a Progressive quote. Refer to the factors below to see how your credit score with Progressive was determined.

For these factors, your credit history was favorable:

  • No credit inquiries in the past 24 months
  • No history of accounts or loans more than 30 days past due
  • Most recent reported car loan or lease opened 1 to 4 years ago
  • No collection, default, repossession, foreclosure, or charge-off within the last 7 years
  • No installment loans currently in collection, default, repossession, forclosure, or charge-off
  • More than 5 years of reported credit history
  • Open loan and account balances total less than 95% of total available credit
  • 4 or more loans or accounts with satisfactory current payment status
  • 2 or fewer loans or accounts opened in the last 12 months
  • No bank revolving account opened in the last 4 months

For these factors, your credit history was unfavorable:

  • Earliest reported account or loan opened after age 30

For these factors, your credit history was neutral:

  • Revolving account balances total 20 to 39% of available revolving credit

Credit terms

  • Installment loans have fixed terms with regular payments, such as a car loan or lease, home loan, student loan, or personal loan.
  • Revolving accounts have varying payments depending on the balance of the account. This includes all major credit cards and cards from department stores.
  • Credit inquiries do not include inquiries for the purpose of obtaining an insurance quote or inquiries by credit card companies for the purpose of offering you a card. Multiple inquiries which occur within 30 days of one another are counted as a single entity.