Insurance Basics
Credit-Based Insurance Scores: How Your Credit Affects Your Home and Auto Premiums
By the PolicyZen Team · Updated March 2026 · 8 min read
When you apply for home or auto insurance, your insurer runs a credit check. Not for the reason your bank does — they're not assessing your ability to pay. They're using your credit history to predict how likely you are to file a claim.
The resulting number is your credit-based insurance score. It's not your FICO score. It's not publicly disclosed to you. And it can mean the difference between paying $800 and $1,400 per year for the same coverage, on the same home, in the same neighborhood.
Most policyholders have no idea this is happening.
In 47 states, insurers are legally permitted to use credit-based insurance scores to set home and auto insurance premiums. California, Hawaii, and Massachusetts ban the practice entirely. Maryland bans it for homeowners insurance but allows it for auto. Every other state allows it to varying degrees.
How Credit-Based Insurance Scores Are Built
Credit-based insurance scores are calculated by the major credit bureaus (Equifax, Experian, TransUnion) and specialized providers like LexisNexis using data from your credit report. The factors are similar to but weighted differently from your standard FICO score:
- Payment history — late payments, delinquencies, collections (most heavily weighted)
- Outstanding debt / credit utilization — how much of your available credit you're using
- Length of credit history — longer, more established histories score better
- Types of credit — mix of revolving (credit cards) and installment (loans) accounts
- New credit inquiries — recent applications for new credit
- Public records — bankruptcies, judgments, liens
What's excluded: income, assets, employment history, race, nationality, and other demographic characteristics. The score is credit-only — though critics argue that credit history correlates with protected characteristics and that the practice has disparate impact on lower-income and minority communities.
Why Insurers Use It
The actuarial basis: insurers have decades of data showing that people with lower credit-based insurance scores file more claims, on average, than people with higher scores — regardless of driving record, home age, or other traditional risk factors. Whether you find this compelling or troubling, the correlation is statistically real and regulators in 47 states have accepted it as a legitimate rating factor.
How Much It Can Affect Your Premium
| Credit Score Tier | Typical Auto Premium Impact | Typical Homeowners Impact |
|---|
| Excellent (750+) | Lowest available rates | Lowest available rates |
| Good (680–749) | Moderate — typically 15–25% above best rates | Moderate increase |
| Fair (620–679) | Significant — 30–60% above best rates | Noticeable increase |
| Poor (below 620) | Very high — often 60–150% above best rates | May result in declination or non-standard market |
Example: Two drivers with identical driving records, same car, same ZIP code. One has excellent credit; one has fair credit. The fair-credit driver may pay $600–$900 more per year for the same auto coverage. Over 10 years, that's $6,000–$9,000 in extra premiums — for the same risk profile in every other dimension.
States Where Credit Can't Be Used
- California: Bans credit-based insurance scoring for both auto and homeowners insurance since 1989 (Proposition 103). Rates are based on driving record, miles driven, and years of experience — not credit.
- Hawaii: Bans credit-based scoring for auto insurance.
- Massachusetts: Bans credit-based scoring for auto insurance.
- Maryland: Bans for homeowners insurance; allows for auto.
- Michigan: Substantially restricted under recent auto insurance reform; limited use for auto.
What You Can Do
- Know your credit-based insurance score: You can request it from your insurer. Under the Fair Credit Reporting Act, insurers who take an adverse action (charge more or decline coverage) based on your credit must notify you — you can then request a free copy of the report used.
- Improve your credit: The same things that improve your FICO score improve your insurance score — pay on time, reduce credit utilization, don't open unnecessary new accounts, let history age.
- Dispute errors: Errors on your credit report affect your insurance score. Review your credit reports annually at AnnualCreditReport.com and dispute inaccuracies.
- Request re-scoring after improvement: If your credit has improved significantly since you last applied for insurance, ask your insurer to re-run the score. Some states require insurers to re-run periodically; in others, you have to request it.
- Shop among carriers: Different insurers weight credit-based scores differently. A carrier that relies heavily on credit scoring may charge you much more than one that weights it less — for identical coverage.
The Policy Debate
Credit-based insurance scoring is one of the most contested practices in insurance regulation. Supporters cite the genuine actuarial correlation between credit and claims. Critics argue it punishes people for circumstances — medical bankruptcies, job loss, divorce — that have nothing to do with how carefully they drive or maintain their home. The debate is active in state legislatures, with California's ban as the furthest-reaching restriction and an ongoing national conversation about whether the practice should continue.
Frequently Asked Questions
Does shopping for insurance hurt my credit score?
Insurance inquiries are "soft pulls" that do not affect your FICO credit score. Unlike applying for a mortgage or credit card (hard pulls), insurance companies checking your credit for rating purposes doesn't lower your score. You can shop multiple insurers freely without any credit impact.
I've never filed an insurance claim. Why does my credit matter?
From an actuarial perspective, credit-based insurance scores predict future claim probability — not past behavior. The correlation between lower credit scores and higher future claims is the basis for the practice. Whether that's fair is a policy question that reasonable people disagree on. The practical reality: in most states, your credit affects your premium regardless of your claims history.
Can an insurer refuse to cover me based on credit?
In some states and for some policy types, yes — particularly in the homeowners market. Very low credit scores can result in denial in the standard market and referral to non-standard or surplus lines insurers. This is most common for homeowners insurance in states with significant credit-based rating, and is part of why the availability and affordability of insurance varies so dramatically across credit tiers.
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