Insurance companies rely on several characteristics to determine rates that are developed by the actuarial department and are used to establish the premium for that risk. Many of these characteristics are obvious for the property being insured. Distance to the fire station is important in assessing the risk of how much of a property will be burned before firefighters can come to put out the fire. Proximity to the ocean or a wildfire area are other factors important in insuring property. Automobile insurance is the same way.

The characteristics for rating auto insurance have changed over time. For decades the standard variables used in rating drivers on auto policies were age, gender, driving record, accident history, and location. The 1990's introduced a new variable, the insurance credit score. Insurers discovered that a correlation could be made between a certain insurance credit score and the chances that people would make claims against their auto insurance policies.

The insurance credit score is different from the credit score that is used when buying a car, house, or other expensive item where the seller may need to know whether the purchaser has the wherewithal to pay for that large purchase. The insurance credit score uses the same characteristics a regular credit score does, including payment history, level of debt, length of credit history, new credit or pursuit of new credit and types of credit used, but it weights these factors differently, putting more emphasis on past payment history and less on types of credit used.