You may have heard that most insurance companies, including GEICO, use credit information in most states as one small piece of the larger puzzle in determining insurance premiums. Whether you're just curious about the practice or you received a notice, we think it's important that you have all the facts.
By the way, GEICO only uses credit information in states where it is permitted by law.
First things first — your credit score won't be impacted
Credit-based insurance scores (discussed in detail below) are based on information in your credit report. The first thing you should know is that if GEICO does obtain a credit-based insurance score as part of calculating your insurance quote, the inquiry is labeled as being from the insurance company.
Insurance-related inquiries are NOT counted against your credit score. If you obtain your credit report from one (or more) of the major bureaus, you will be able to see the inquiry, but it will never lower your score or impact your ability to obtain credit.
What does credit have to do with insurance? Isn't my driving record more important?
Insurance premiums are based on a wide variety of factors such as vehicle type, how the vehicle is used, driving history of all drivers listed on the policy, as well as claims history. Studies have shown that credit-based insurance scores have a strong correlation with the likelihood of filing a claim. When these scores are paired with other insurance factors, insurance companies are better able to determine an accurate personal rate based on the predicted risk.
According to a survey by Conning and Co., over 92% of all major insurers, including GEICO, use credit-based insurance scores to help determine insurance premiums in most states. In many cases, this information helps lower the cost of insurance.
If you'd like to learn more about insurance and credit from a third party, check out Mint.com’s "Why Do Insurance Companies Use Credit Reports and Scores?".
What is a credit-based insurance score?
Before we answer this question, it's important to note that you will never be denied a GEICO policy solely because of your credit-based insurance score.
Like your credit score (the three digit number used by financial institutions to determine credit eligibility), a credit-based insurance score is a numerical summary of information on your credit report. However, credit-based insurance scores do not look at the amount of credit you carry or other indicators of income. These scores only consider information that has shown a correlation in predicting possible future claims losses. This information can be things like payment history, collections, length of credit history, and credit utilization.
My credit score is very high. Why wouldn't I receive the best rate?
Your financial credit score is not the same as your credit-based insurance score. In addition, your credit-based insurance score is used with many other factors to determine your rate.
What if my credit report is wrong? Can you tell me what is on my credit report?
If there is an error on your credit report, contact the consumer reporting agency directly and notify them of any discrepancy. Once they correct their records, please contact us and we will be happy to re-evaluate your quote.
If your GEICO quote was adversely impacted by your credit-based insurance score, we will share with you the name and address of the consumer agency that provided us with the information that was used to help determine your rate. We will include contact information for the consumer reporting agency so that you can contact them for a copy of your complete credit report. To protect your privacy, our sales and service agents do not have access to your credit information.
If you'd like to review your credit report, you are entitled to one free report each year from each of the three major credit bureaus: Experian, Equifax, and TransUnion. For the most accurate understanding of your credit, you should review the reports from all three bureaus annually.
What can I do to improve my credit-based insurance score?
Things like the length of your credit history can only change with time; however, you can always strive to improve your overall credit-based insurance score and credit score by paying your bills on time and maintaining a low balance on your credit cards.
But remember – a credit-based insurance score is only one of many factors used to determine insurance premiums. Other things like driving safely and responsibly are also important if you're looking for ways to reduce insurance costs.
Do I have any rights if my credit history affects my rate or eligibility for insurance?
Absolutely. If GEICO has taken an adverse action against you (such as offering you a higher rate) as the result of information contained in your credit report, you may obtain a free copy of your credit report. If you believe there are errors in the report, you should notify the consumer reporting agency immediately.
What happens if I have a special circumstance that has negatively impacted my credit history?
If your credit history has been impacted by an extraordinary life event such as a medical crisis, temporary loss of employment, divorce, the death of a spouse or a household member, identity theft, military deployment overseas, or a catastrophic event, we will take the special circumstance into consideration so it does not negatively impact your rate. We may require you to provide documentation of the special circumstance.