How Credit-Based Insurance Scores Work

A credit-based insurance score (CBIS) is a numeric model generated by LexisNexis or TransUnion from your credit file, used by insurers in 46 states to help set your auto insurance premium. It is related to but not identical to a FICO score: both pull from the same credit-bureau data but weight the inputs differently and output different numbers. Research by the Federal Trade Commission (FTC 2007 report) and multiple state insurance departments has consistently found a statistically significant correlation between CBIS and claim frequency, which is why insurers use it.

What CBIS actually uses

Reported weightings vary slightly by model vendor; the typical breakdown:

• Payment history (~40%): on-time payments on credit cards, loans, mortgages. Late payments and defaults are the single largest negative input.
• Credit utilization (~30%): percentage of available revolving credit you're using. High utilization reduces the score.
• Length of credit history (~15%): age of accounts, average age of all accounts.
• New credit (~10%): recent credit inquiries and new accounts.
• Credit mix (~5%): diversity of credit types (revolving, installment, mortgage).

How CBIS differs from FICO

• FICO is designed to predict loan default. CBIS is designed to predict insurance-claim frequency. The models use similar inputs but tune for different outcomes.
• FICO range is 300 to 850. CBIS range varies by vendor; LexisNexis typically uses 200 to 997, TransUnion 150 to 950.
• FICO weights recent inquiries more; CBIS weights long-term payment history more.
• A 720 FICO can correspond to a low or mid insurance tier depending on the specific CBIS model and insurer weighting.

What NOT in CBIS

• Income or employment.
• Age, race, gender, marital status (regulated against; may be used separately as rating factors but not inside CBIS).
• Prior insurance claims (that's CLUE, a separate database).
• Driving record (that's MVR).

States that prohibit CBIS in auto rating

• California (Prop 103).
• Hawaii.
• Massachusetts.
• Michigan (2019 reform).

Practical implications

• A credit improvement from Poor to Fair can cut full-coverage premium by 20 to 30 percent in most states.
• CBIS updates with your credit file: a mid-term score improvement doesn't automatically re-rate your policy until renewal (or until you request a re-rate at carriers that permit).
• In rising-credit scenarios, 6-month policies see the benefit sooner than 12-month.