About Us

Credit-Based Insurance Scoring

Credit information derived from customers' credit reports is only one of many factors that American Family Insurance Company considers when pricing a risk. Credit information has been proven to effectively predict the likelihood of future insurance claims. We’re finding that our use of credit information allows us to offer lower premiums to many customers who otherwise would pay more for their insurance.

During the past several years, insurance companies have increasingly used credit information as a factor to price and evaluate insurance policies. For an overview of how American Family Insurance uses credit information, please refer to the frequently asked questions below.

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What is a consumer report?

According to the Fair Credit Reporting Act, the term "consumer report" means any communication of any information, by a consumer reporting agency, bearing on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used, or expected to be used, or collected, in whole or in part, for the purpose of serving as a factor in establishing the consumer's eligibility for credit or insurance to be used primarily for personal, family, or household purposes, or employment purposes, or any of the permissible purposes authorized under Section 604 of the Fair Credit Reporting Act.

American Family Insurance gathers information obtained through routine business transactions and occasionally from outside sources by ordering consumer reports from consumer reporting agencies. The information provided might include your driving record (motor vehicle reports or MVR), claims history (claims loss underwriting exchange reports otherwise known as a CLUE report), and credit report data.

What is a credit-based insurance score?

A credit-based insurance score is a numerical 'snapshot' of your insurance risk at a particular point in time based on information in your credit report such as:

• Collections
• Length of credit history
• Types of credit in use
• Number of new applications for credit

What is the difference between a credit-based insurance score and a credit score?

Credit-based insurance score:

• Used by insurance companies
• Predicts future insurance risk (how likely to file a claim)
• Used to determine premium to cover the risk

Credit score:

• Used by lending institutions
• Predicts future credit risk (how likely to repay a loan)
• Used to determine whether to give a customer a loan and what interest rate to charge

Since each score is predicting a different event, the credit characteristics and their relationship to each risk is different. Also, credit-based insurance scores are not developed to coincide with credit scores and are not meant to be comparable or connected.

What does my credit history have to do with insurance?

There is a very strong connection between insurance and credit history. Research shows people with certain patterns of behavior in their credit history are more likely to result in losses for the insurance company. While having a good insurance score does not mean a policyholder is a good driver or a more responsible homeowner, research shows that those individuals generally file fewer and/or less expensive claims. In addition, scores help insurers to design and price products for various market segments, ultimately extending insurance to more people. The use of credit information may allow certain customers to benefit in lowered premiums.

What information is not used to calculate a credit-based insurance score?

Credit-based insurance scores only take in to consideration the credit-related information on your credit report. They do not consider your race, gender, age, income, nationality, religious affiliation, disability or marital status as this is prohibited by the Equal Credit Opportunity Act. No one piece of information will determine your ultimate credit-based insurance score.

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 medical crisis, temporary loss of employment, divorce, the death of an immediate family member or identity theft, 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.

How do I obtain a copy of my credit report?

To request a copy of your credit report annually, contact the credit reporting agencies directly:

Equifax: (800) 685 - 1111 - www.Equifax.com
Experian: (888) 397 - 3742 - www.Experian.com
TransUnion: (800) 888 - 4213 - www.TransUnion.com

American Family Insurance will notify you if you are charged a higher premium as the result of information contained in your credit report. The notice will advise you how to obtain a free copy of your credit report from the credit reporting agency that provided the information.

What information is not used to calculate a credit-based insurance score?

Credit-based insurance scores only take in to consideration the credit-related information on your credit report. They do not consider your race, gender, age, income, nationality, religious affiliation, disability or marital status as this is prohibited by the Equal Credit Opportunity Act. No one piece of information will determine your ultimate credit-based insurance score.

What do I do if the information on my credit report is wrong?

American Family Insurance cannot correct the information contained on your credit report. If you find an error on your credit report, contact the credit reporting agency that provided the report. The Fair Credit Reporting Act (FCRA) allows the credit reporting agency a 'reasonable period of time,' generally not to exceed 30 days, to reinvestigate consumer-disputed items.

Once the credit reporting agency has investigated and updated its records, request that American Family Insurance be notified of the correction so we have the most current information to rate your policy. Please note that some corrections may have little or no impact on your credit-based insurance score or policy premium.

Will American Family Insurance's request for my credit report affect my credit based insurance score?

No. An insurer’s request to view a customer's credit report for insurance purposes is considered a soft inquiry and is not used in the calculation of a credit based insurance score. This means American Family Insurance's request will only be visible to you and the credit reporting agency.

How can I improve my credit-based insurance score?

Improving your credit-based insurance score will take time and often there is no quick fix. Credit-based insurance scores reflect credit payment patterns over time with more emphasis on recent information. There is no mystery about how people can improve their credit-based insurance scores. That means showing a historical pattern of paying your bills on time and using credit conservatively.

Here are some general tips to consider:

Do:

• Pay your bills on time. Delinquent payments and collections can have a major negative impact on our credit-based insurance score.
• If you have missed payments, get current and stay current. The longer you pay your bills on time, the better your credit-based insurance score.
• Keep balances low on credit cards and other revolving credit. High outstanding debt can affect a credit-based insurance score.
• Pay off debt rather than move it around. The most effective way to improve your credit-based insurance score in this area is by paying down your revolving credit.
• Note that it's OK to request and check your own credit report. This won't affect your credit-based insurance score, as long as you order your credit report directly from the credit reporting agency or through an organization authorized to provide credit reports to consumers.
• Apply for and open new credit accounts only as needed. Don't open accounts just to have a better credit mix—it probably won't raise your credit-based insurance score.
• Do your rate shopping for a loan within a focused period of time. Credit-based insurance scores distinguish between a search for a mortgage or auto loan (where it is customary to shop for the best rate), and a search for many new credit lines.

Don't:

• Don't close unused credit cards as a short-term strategy to raise your credit-based insurance score.
• Don't open a number of new credit cards that you don't need, just to increase your available credit. This approach could backfire and actually lower your credit-based insurance score.
• If you have been managing credit for a short time, don't open a lot of new accounts too rapidly. New accounts will lower your average account age, which will have a greater effect on your credit-based insurance score if you don't have a lot of other credit information. Also, rapid account build-up can look risky if you are a new credit user.

Be aware that:

• Paying off collection accounts or other derogatory items will not remove them from your credit report. The fact that this event occurred is predictive, in addition to any dollar amount associated with the past due.
• Closing an account will not remove it from your credit report and may not improve your score. For suggestions on how to improve your credit information, visit TransUnion's website at transunion.com.

Additional Information

American Family Insurance offers a brochure for you to download1 and read at your convenience.

Credit-Based Insurance Scoring Brochure (288KB)

1Adobe Acrobat Reader is needed to open this PDF file. If you need assistance with Adobe Acrobat Reader, please go to Adobe's Customer Support page. American Family Insurance is not liable for any direct or indirect technical or system issues or consequences from your use of third-party technologies or programs accessible through our site.