A Quick Debriefing on the Auto Credit Score

Odds are you’re probably pretty familiar with the term “FICO Score.” You may have even heard of the FICO Mortgage Score. But have you heard of the Auto Credit Score? Did you even know that existed?

What is The Auto Credit Score?

What most people refer to as the “Auto Credit Score” is actually called the Auto Insurance Score (AIS). It is a new score, developed by the Federal Trade Commission (as opposed to your FICO Score, which was developed by the Fair Isaac Corporation).

Most insurance companies have now adopted the use of the Auto Insurance Score. CreditKarma.com did a study in which they found that 15 of the big-name insurance companies use the AIS. That is 72% of the total market share. So it’s safe to say that the AIS definitely isn’t going anywhere.

Auto Credit Score

Photo Credits: http://www.flickr.com/photos/sercasey/299031183/

What Does It Affect?

Just like your FICO Score affects your ability to obtain and your interest rate with a loan or a new line of credit, your Auto Insurance Score affects your potential insurance rates. Insurance companies use your AIS to determine your potential insurance liability. They use this score to determine what type of rates they will need to charge you for insurance. It works just like your other scores: the higher risk they think you are, the higher premiums you will pay.

What Factors Affect My AIS?

Here are a few of the factors that go into determining your Auto Insurance Score:

  • your credit utilization ratio (your ratio of current revolving debt that you are currently using compared to your available revolving credit (or credit limit))
  • your credit history (how you’ve paid your bills, if you’ve missed payments, if you have a bankruptcy, etc)
  • credit history length
  • the types of credit you’ve had

How Can I Improve My AIS?

Your AIS can make a big difference in the types of insurance premiums that you will pay. So what can you do if you have a low AIS? Well, according to Lexington Law:

“Although the AIS model is different than a traditional credit score, many of the same components are used to tally both.”

In the above quoted article, Lexington Law gives a few tips of things you can do if you find your AIS lower than you’d like it to be:

  • The Five Factors: payment history, debt utilization, credit length, new credit, and diversification. Work to improve these and it could help to increase both your credit score, as well as your AIS.
  • Shop Around. Because not all insurance agencies use the AIS model, if you shop around you may be able to find a reputable insurance company that doesn’t use it. So, your low AIS wouldn’t affect your insurance rates.
  • Get An Auto Loan. If you are getting a new car, your new auto loan could help raise your AIS.

This article was written by guest writer Nicole. She enjoys helping people understand the ins and outs of credit scores.

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