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.
