Does Credit Score Affect Insurance Rates?

The Short Answer: Yes, in Most States

In the majority of U.S. states, insurance carriers are legally permitted to use a version of your credit history — called a credit-based insurance score — as one factor in determining your premium. This applies most commonly to auto and homeowners insurance. Understanding how this works gives you meaningful leverage when shopping for coverage.

What Is a Credit-Based Insurance Score?

A credit-based insurance score is not identical to your standard FICO score. It is a separate calculation built specifically to predict the likelihood of an insurance claim, not the likelihood of repaying a loan. Insurance scoring models typically draw on similar underlying data — payment history, amounts owed, length of credit history, new credit inquiries, and credit mix — but they weight those factors differently than lending scores do.

Why Carriers Use Credit Data

Actuarial research conducted over decades has shown a statistical correlation between credit history patterns and insurance claim frequency. Carriers argue that including credit data leads to more accurate risk pricing. Consumer advocates note that the relationship does not imply causation and that credit-based scoring can create disparities for certain populations. Both perspectives are part of an active regulatory debate.

States Where Credit Cannot Be Used

A handful of states — currently including California, Hawaii, Maryland, and Massachusetts — restrict or prohibit the use of credit information in setting auto or homeowners insurance rates. Michigan has also implemented significant restrictions. If you live in one of these states, your credit history will not affect your insurance premium, regardless of which carrier you choose. Regulations in this area are evolving, so it is worth confirming the current rules in your state.

How Much Can Credit Affect Your Premium?

The impact varies by carrier, policy type, and state. Some carriers weight credit heavily as part of their pricing model, while others assign it less influence. This is one reason why comparing multiple carriers — using a platform like Insuranceseek to run side-by-side comparisons — is especially important if you have a below-average credit profile. The spread in pricing across carriers for the same individual with challenged credit can be substantial.

What You Can Do About It

• Check your credit report for errors. Errors on credit reports are not uncommon. Incorrect derogatory marks can suppress your insurance score. Disputing and correcting errors is one of the fastest ways to improve your position.
• Pay existing balances down. Credit utilization — the ratio of your balances to your credit limits — is a factor in most scoring models. Reducing utilization has a measurable positive effect over time.
• Avoid unnecessary new credit inquiries. Each hard inquiry can have a minor negative short-term effect. Avoid opening new credit accounts unnecessarily in the months before shopping for coverage.
• Ask carriers about re-scoring. Some states require carriers to re-run your credit-based insurance score periodically or upon request, which can work in your favor if your credit has improved since your policy was issued.

The Bigger Picture

Credit is one factor among many in insurance pricing, alongside driving record, claims history, location, and coverage levels. Improving your credit is a long-term strategy. In the short term, comparing multiple carriers remains the single most reliable way to find competitive pricing regardless of your current credit profile.