Insurance companies use many factors to underwrite an insurance policy. In addition to factors like age, marital status, driving record and type of vehicle, many insurance companies, including Progressive, use credit information to evaluate a consumer's financial responsibility.

Insurance companies have found a strong correlation between financial responsibility and insurance losses. The credit information that we review focuses primarily on bill-paying behavior, not credit-worthiness. Using credit information allows us to assess risk more accurately.

We will not see your actual credit report during the underwriting process. The information will be ordered through an automated system and interpreted by our quoting system in the form of an insurance credit "score." The score will then be used in our underwriting process. When we use credit information as an underwriting tool, we are only concerned with the risk grouping into which a consumer falls, which will ultimately influence the consumer's rate.

                Will it affect my credit score?

No. The inquiry from Progressive will appear on your credit report as an insurance inquiry. Insurance inquiries are only reported to you, so they will not be included in credit score calculations by other parties.

________________________________________

  What is FICO Score?
The FICO score is the most common credit score used by creditors/lenders in order to evaluate a borrower's creditworthiness. It is developed by Fair Isaac Corporation. However, scores offered by each credit reporting agency (CRA) or credit bureau may vary because not all creditors report information to every CRA. Moreover, the credit scoring models used by the bureaus slightly differ from one another.


The FICO scores offered by the 2 CRAs namely Equifax and TransUnion are known as Beacon and Empirica. Consumers can get these scores online from MyFICO. Experian, another CRA also offers FICO score but consumers can't access it from MyFICO. They can get credit scores based on Experian data available on Experian's website. However, the Experian FICO scores are available only to lenders.


The FICO score/credit score is calculated using the information available on your credit report. The credit bureaus can only calculate your FICO score if you have at least 1 account open for 6 months or more. Also, there should be at least 1 undisputed account reported to the bureaus in past 6 months.


What factors affect credit (FICO) scores?
In general, there are 5 factors which affect your credit score calculation. The factors with their weightage of importance are given below:


Payment history (35%): This includes information on -

How you've paid credit cards, installment loans, mortgages etc.
Adverse public records such as bankruptcy, liens, collections
Time of past due items and adverse public records
Accounts paid as agreed

Amount you owe (30%): This provides details on -

Number and type of accounts you owe
Ratio of balance to total credit limit (revolving accounts)
Ratio of balance to original loan amount (installment loans)

Length of credit history (15%): This includes the time period since you've opened different types of accounts.

New credit (10%): This provides details of -

The accounts you've recently opened
Number of recent credit inquiries
Time since recent credit inquiries
Time since accounts opened recently
How you've rebuild credit after past credit problems

Credit/loan types used (35%): This factor includes the different types of credit/loans you've opted for.
What are the ways to improve credit score?
You can improve credit scores if you're able to keep factors like payment history, amount owed, length of credit history etc in good shape. This is what credit score repair is all about. Given below are 6 ways to improve credit scores/FICO scores.

Avoid missed/late payments: A 30-day late payment may reduce your credit score by 50 points. Your account may be sent to collection due to repeated late/missed payments.

Even if an account is in collection, pay it off and have the status updated on your credit report as "pay for delete" or "paid collection" after negotiating with the creditor. You may even consult a credit counselor if you're unable to pay. The counselor will prepare a budget for you so that you can allocate funds for each debt payment.

However, the best way is to avoid late payment is to set up an automatic bill pay through your bank account. But make sure that the funds are being processed and sent to your creditors.

Pay off debt instead of moving it around: Maintain low balances (around 10% of the available credit) on your credit cards and revolving accounts. It's better to pay off debt rather than move it from account to another. This is because when you owe the same amount of debt but have fewer accounts open, it lowers your score further.

Moreover, if you move around debt and close unused accounts within a short time, it reduces your available credit limit while your debt balance becomes higher. Also, the length of your credit history is reduced. This affects your debt-to-credit utilization ratio, which should be kept around 30% of your credit limit.

However, when you don't close accounts, you need to keep them active. This can be done by making a purchase or two using the cards every 6 months. This will improve your credit utilization ratio and help you in credit score repair.

How to shop for new credit: Try to shop for new credit/loan within a short period of time. This is because creditors/lenders may pull your credit report and generate inquiries which affect credit scores.

Usually, for mortgage and auto loans, all inquiries or credit pulls made within a 30-day period is treated as single inquiry. So, the sooner you complete shopping for new credit, the better it is for your score. And, make sure that you don't open new accounts just to have a better mix of credit, because if you fail to manage your credit, it will have a negative effect on your credit scores.

Moreover, too many new accounts opened at once will raise your available credit limit compared to the credit used and thus reduce your score. Besides, new accounts will lower the average account age thereby reducing your score if you have not taken other types of credit.

Authorized users: When you add an authorized user to your credit card account, make sure that the user doesn't overspend. Being the principal card holder, you'll have to make the payments and in case you can't afford it, your credit score would get the hit along with that of the authorized user.


Avoid store cards and small debts: Getting too many store cards isn't a good move if you're going for credit score repair. Such cards are open lines of credit and too many of them are considered as risky by credit bureaus, especially if these are not affiliated to a national creditor (such as MasterCard, VISA etc).


Change in names: Let's say your name is Adriana J. Smith and that's how it's reflected in your credit report. If you change your name and drop the &"J" while applying for credit, then the credit bureau will prepare a separate credit report for you even though your address may remain the same. So, you need to notify the creditor as well as credit bureau if there's any name change. it
Credit Score (FICO) basics- How to improve credit scores
Credit score is a 3 digit number that speaks of your creditworthiness – the way you've managed credit and bills in the past. The score helps lenders/creditors judge whether you're a potential borrower. Usually credit scores range from 300 to 850. In this article on credit scores, you can check out the topics given below: 

 

How to boost your score

When you plan to apply for credit, be aware that your FICO score provides only a general idea of how you’ll be viewed by lenders. So don’t rely on it as the definitive measure of your creditworthiness. Instead, keep your credit quality high by following these steps:

Credit Score (FICO) basics- How to improve credit scores

Are free credit scores available?