Unless you're denied coverage, you might not have considered how your insurance company decides who gets insurance and who doesn't.

Even people who take good care of their home, drive safely, and pay bills promptly are sometimes refused a policy or see a sudden increase in their premiums (if this happens to you, check out these Top Tips for Saving on Auto Insurance).

Why? Well, it turns out that insurance companies rely on factors other than the obvious ones to decide who they should insure. It's important to know these and how much weight they carry so that you can avoid making decisions that affect your insurability.

FICO Score

You’ve probably heard of a credit report, but FICO scores might be a new concept for you. A FICO score is an assessment of an individual's credit risk and based on information from the three major credit reporting agencies: Equifax, Experian, and TransUnion.

Your FICO score is meant to help potential lenders decide whether you are a responsible borrower, but insurance companies pay attention to it, too. Approximately 95 percent of auto insurers and 85 percent of homeowner insurers use these scores, though not all states permit it.

Insurance companies that look at your FICO score do so to gauge how likely you are to file claims, not to determine your creditworthiness. Studies have identified a strong correlation between a good FICO score and a reduction in claims. The data also suggests that people who use less than 30 percent of their available credit tend to submit fewer claims.

If you are denied insurance coverage because of your credit, the insurance company will send you an "adverse action notice" telling you which credit bureau they used and how you can contact them.

If there is an error on your credit report, this will affect your FICO score, so it's a good idea to review yours regularly. If you see an error, have it corrected immediately; otherwise, you might pay more than you should for insurance, if you can get any coverage at all.

CLUE and A-Plus Reports

Insurance companies exchange information on your insurance history through a national database maintained by third parties.

The CLUE (Comprehensive Loss Underwriting Exchange) database tracks both automobile and homeowner insurance information in two separate reports. A CLUE report comprises personal data for identification purposes as well as any property loss claims you made over the past seven years. Not all states require that insurance companies tell you they are collecting this data, so there may be a report on you without your knowledge.

Few people know about CLUE reports unless they learn the hard way: by being refused insurance or seeing their premium skyrocket. They may be inaccurate or incomplete too, so you should find out what is on yours to avoid problems. Keep in mind, your rights are the same as they are with your credit report. Review the data in your CLUE report carefully (see CLUE Yourself In: How Your Claims History Informs Your Insurance Future to learn more).

Some insurers use the A-PLUS (Automated Property Loss Underwriting System) report instead. You can obtain a copy of yours by following the information provided here.

Insurance Score

Insurance companies set in-house insurance scores based on your FICO score, information from your CLUE report, your driving record, and your claims history. They are interested in estimating the risk of insuring you, and if your risk is lower, you qualify for lower premiums.

There is no universal agreement about what constitutes a good insurance score. Your score might also vary depending on which reports your insurer consults. Insurance scores range from 200 to 997, with a good score normally being over 770, while a score under 500 is typically considered to be poor.


There's a lot that goes into your insurer's decision to accept your application. By understanding what goes into these various scores, you can take steps to improve your insurability and secure a better rate on your policies.