Credit-based insurance scores: why your credit affects premiums

Your renewal notice arrives and the premium is up, even though you haven’t filed a claim, gotten a ticket or moved. One possible reason has nothing to do with driving: the insurer re-checked your credit, and the score it built from your report came back lower than last year.

Lenders aren’t the only ones scoring your credit file. Insurers do it too, with a separate score built for a separate question.

An insurance score is a different score built from the same report

The National Association of Insurance Commissioners (NAIC) defines a credit-based insurance score as one based partly or entirely on information from your credit history. Insurers use it to estimate the likelihood of claims, not whether you’ll repay a debt.

That difference in purpose changes the math. The NAIC says insurance scores may weigh credit factors differently than traditional credit scores do, so a FICO Score of 700 doesn’t translate to any particular insurance score. The models belong to scoring companies and insurers, and the result feeds into a rating plan rather than appearing on a statement.

How much credit counts in your premium

Credit is one input among many. The NAIC says insurers typically use it alongside claims history, driving record, property characteristics and location, and that in most states insurers can’t use credit-based insurance scores as the sole reason to raise your rates.

The exact weight lives in each insurer’s rating plan, which is why the same driver can see very different credit effects from two companies. A deliberately simplified example shows the mechanism. The factors are invented for illustration; real factors come from each insurer’s filed rates.

Example: an insurer’s base premium for your car, driving record and ZIP code is $1,600 a year. Its rating plan multiplies that base by a credit tier factor.

In this made-up plan, the spread between best and lower tier is $720 a year ($2,080 minus $1,360), with nothing about your driving changing. Real spreads can be smaller or larger, and they differ by company and state. What carries over to real plans is the structure. Credit usually works as a multiplier on a premium set by other factors, so it matters more when your base premium is already high.

States that ban or limit credit in insurance pricing

Whether insurers can use credit at all is a state-law question. Two clear examples for auto insurance:

• California. Under Insurance Code 1861.02, auto rates are set by driving safety record, annual miles, years of driving experience and other factors the insurance commissioner adopts by regulation, and the statute says using any criterion without approval is unfair discrimination. The regulation listing those approved factors (10 CCR 2632.5) doesn’t include credit history.
• Hawaii. Hawaii’s motor vehicle insurance law (HRS 431:10C-207) bars insurers from basing any standard or rating plan, in whole or in part, on a person’s credit bureau rating.

Other states restrict use in narrower ways. Experian’s March 2025 roundup counted seven states with strict limits: California, Hawaii, Maryland, Massachusetts, Michigan, Oregon and Utah. In its summary, Massachusetts keeps credit out of auto rates and homeowners rates, Michigan bars it from auto rates and from cancelling or non-renewing auto and home policies, and Maryland lets auto insurers use credit on a new policy but not to raise premiums at renewal. Oregon and Utah mostly limit how credit can be used after a policy is in force. Because these rules change through legislation and regulation, check your own state insurance department’s website before assuming credit is or isn’t in your rate.

When credit costs you more, you’re owed a notice

Under the Fair Credit Reporting Act, “adverse action” in insurance includes a denial or cancellation, an increase in any charge, or a reduction or other unfavorable change in coverage, when connected to underwriting (15 U.S.C. 1681a(k)). If an insurer takes that kind of action based even partly on your credit report, 15 U.S.C. 1681m requires it to tell you, name the bureau that supplied the report, and explain your right to a free copy from that bureau within 60 days and your right to dispute anything inaccurate.

Read that notice closely, the same way you’d read a lender’s. Our guide to adverse action notices explains what each section is telling you. Then pull the report the insurer used and read it line by line. An insurance score can be dragged down by the same errors that hurt a lending score: an account that isn’t yours, a late payment that was never late, a collection reported twice.

What actually helps

There’s no separate playbook for insurance scores. They’re built from the same report, so the habits that drive how credit scores are calculated (on-time payments, modest card balances, few new accounts) are the same habits that tend to help here. Beyond that:

1. Fix errors first. A dispute with the bureau is free, and a corrected report flows into every score built from it.
2. Ask your insurer whether it re-checks credit at renewal. Practices vary, and some states limit renewal changes. If your credit has improved a lot since you bought the policy, ask whether it will re-run your credit.
3. Shop the policy. Each insurer uses its own model and its own credit factors, so a low insurance score at one company doesn’t mean the same treatment everywhere.
4. Weigh the whole premium. If you’re buying a car and financing it, your credit affects both the loan and the policy. Credit scores and car loans shows the loan side of that cost.

An insurer pulls your report under its own permissible purpose, the underwriting of insurance, with no loan application involved. Many people never realize it happened until a notice arrives.