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New Jersey Insurance Scoring FAQ

Does IFA see my individual credit report when determining my insurance score?

No. Insurance scoring is confidential and objective. An insurance score is a numeric rating based on factors relevant to calculating insurance risk, such as payment history and similar information gathered from major credit bureaus.

Further, insurance scores are not produced by IFA; they are produced by Choicepoint. IFA and IFA’s agents writing policies for PA, MD and NJ Car insurance do not see a person’s individual credit report, only the score calculated from Choicepoint.

Specific personal information is not taken into account when calculating an insurance score. New Jersey car insurance scoring policies, or the other state’s policies we write, do not consider personal factors such as race, nationality, religion, gender, marital status, age, income or net worth.

Why does IFA use credit information to price and underwrite insurance policies?

Over the past several years, insurance companies have increasingly included certain information from credit reports among the factors used both to underwrite and to price PA, MD and NJ car insurance policies. As consumers hear more about this practice, they may have questions and concerns, most of them related to the following:

  • What makes credit information relevant to the likelihood of future insurance losses?
  • What kind of information from a policyholder’s credit history determines the insurance rate that he/she receives?

We would like to explain how IFA uses credit information, and why. Below are frequently asked questions about the use of credit information in insurance rating and underwriting practices that we use to determine MD, PA and NJ car insurance policies with IFA.

I qualified for the best rate with my mortgage company. Why don’t I qualify for the best rate on my MD, PA or NJ car insurance? What is the difference between the two?

The difference is that an insurance company considers only those items from credit reports that are relevant to insurance loss potential. Unlike a mortgage company, an insurance company is not assessing a customer’s credit-worthiness. The determinations made on the basis of credit report information by a mortgage company can differ from those made by an insurance company because the two industries are looking for different things when they review credit information. Information that is important to one may not be as important to the other, or the two may assess the same piece of information in different ways.

The most important thing to keep in mind, however, is that many people who get the best rate with a mortgage company also do well on Choicepoint’s scoring model; they would qualify for better rates with MD, PA and NJ car insurance policies with IFA than they would have if IFA did not consider credit information at all. That is true even if the policyholder doesn’t qualify for the very best rate based on credit information.

What kind of credit information does IFA use?

As mentioned above, we consider only those items from credit reports that are relevant to insurance loss potential. We do not consider information such as how much money you make or whom you owe because we are not assessing our customer’s credit-worthiness. The kind of information in credit reports that has proved relevant to calculating insurance risk includes bankruptcies, judgments, collections and delinquencies. The number and types of credit accounts a customer has, length of account history and account balances relative to limits are other factors we consider.

Also, the presence in your credit report of some types of inquires can affect your insurance rate, but it is important to understand which types of inquires can have an effect. Your insurance rate will not be affected by promotional inquires, routine account review inquires, or the inquiry IFA or any other insurer makes to review your credit history for insurance purposes.

How does IFA use information from credit reports?

In rating and underwriting insurance policies, each of the several factors we consider from credit reports is assigned a ‘score’. Our method of considering all of these factors together, as a whole, ensures that no single negative item will necessarily prevent a customer from receiving our best rates. Furthermore, many customers, while not qualifying for the very best rate, will still qualify for a rate that is significantly better than average due to the information we consider from credit reports.

What type of credit information is generally associated with the best scores?

Customers who have the best scores include those with a long-established credit history that is free of major events such as bankruptcies and collections, and reflect either no delinquencies or only delinquencies involving smaller amounts that occurred well in the past. These customers will typically have some credit account activity, but relatively low balances compared to the available credit limits. In addition, they will have few recently opened accounts or inquiries prompted by the seeking of additional credit. While it is difficult to identify specific actions that any customer could take to improve his or her insurance score, customers who manage their finances in a way that is consistent with these characteristics are more likely to have better scores.

What does credit have to do with the likelihood of having an insurance loss?

The link between credit history and loss potential has been studied extensively by many scholars outside the insurance industry, in fields such as psychology, safety engineering, occupational medicine, consumer research, and risk perception. The theories that emerge from these studies point to the added stress that financial pressures can bring and the possibility that financial difficulties may indicate a tendency toward risk-taking behavior—either of which can mean a higher likelihood of accidents.

Whatever the reasons behind the relevance of credit information to potential insurance loss, the predictive power of this information is a matter of fact not theory or conjecture. PA, MD and NJ car insurance policyholders (although this holds true nationwide) with the least favorable scores are nearly 40% more likely to experience losses that are greater in number and severity than those with the most favorable scores.

How can I correct my credit report information if it’s wrong? Will my rate change?

If you discover a mistake in your credit report, all you have to do is contact the reporting agency and correct the report. Then, let us know and we will be happy to re-evaluate any decision we’ve made based on your credit information.

You may contact the consumer reporting agency at:

Choicepoint Consumer Services Center
P.O. Box 105108
Atlanta, GA 30348-5108

Is IFA’s use of credit information legal?

Yes. We are requesting your credit information in a legally permissible manner.

Doesn’t the use of credit report information discriminate against minorities, women and low income people?

No. The insurance scoring models we use today do not consider ethnicity, religion, gender, marital status, nationality, age, income or address. These are simply not factors in credit scoring models.

The use of credit information benefits consumers. For all the reasons outlined above, the use of credit information by insurers is becoming more common. The relevance of credit information to insurance loss potential is proven by the actual loss experience of the insurance companies using it and by independent studies. These same sources also demonstrate that consideration of credit information increases the fairness of insurance underwriting, allows many consumers to pay less for insurance than they otherwise would, and enables insurance companies to offer coverage to more consumers than they have in the past.

Important Notice - Please notify us if an extraordinary life event affected your credit history.

Contact your IFA representatives if you believe your credit information was adversely impacted by an extraordinary life event(s). Such life events include: catastrophic illness or injury; the death of a spouse, child or parent; temporary loss of employment; divorce; or identity theft that occurred within the last 3 years. Your IFA representative will ask you to submit documentation that provides the necessary proof that extraordinary life events have adversely affected your credit history. Once IFA receives documentation, we will determine if you qualify for a lower premium, at which time you will be notified.

Please note: If you would like to review your credit history, please contact your IFA representative within 90 days of your policy's effective date. Please call 1-877-432-2277 ext.199
Fax: 732-815-1778