In many states, auto insurers are permitted to use a credit-based insurance score as one factor in determining your premium, alongside traditional factors like driving record and vehicle type. Many drivers are unaware this factor exists at all until they notice a rate difference that doesn't seem to align with their driving history — a premium increase at renewal, for instance, that their insurer can't fully explain through claims or violations.
How this differs from your standard credit score
A credit-based insurance score is a specialized score, distinct from the credit scores used for lending decisions, calculated using some similar underlying credit data but weighted specifically to predict insurance claim likelihood rather than loan default risk. Insurers and lenders may use different scoring models entirely, even though both draw from similar credit report information. The factors that most heavily influence a credit-based insurance score typically include payment history, outstanding balances relative to limits, the age of credit accounts, recent credit inquiries, and the mix of credit types — similar inputs to a standard credit score, but weighted differently because the predictive goal is different.
Statistical studies used by insurers have found correlations between credit-based insurance scores and claims frequency, which is the actuarial basis insurers cite for using this factor — though this practice remains a subject of ongoing debate and is prohibited or restricted in some states, including California, Hawaii, Massachusetts, and Michigan.
Which states restrict or prohibit this practice
Several states have prohibited or significantly restricted the use of credit-based insurance scores in auto insurance pricing, recognizing concerns about how this practice can affect certain groups of consumers disproportionately. Checking your specific state's insurance regulations clarifies whether this factor is even relevant to your situation. In states where it is permitted, the practice is still regulated — insurers are typically required to notify you if an adverse credit-based insurance score was a factor in an unfavorable underwriting decision, giving you the opportunity to provide context or review your credit report for errors.
How to address this factor if it applies to you
If your state permits this practice and you're concerned your credit-based insurance score might be affecting your premium unfavorably, the path forward is the same as improving your regular credit profile — managing credit utilization, making on-time payments, and addressing any errors on your credit report, since the credit-based insurance score draws on related underlying data. Significant improvements in your credit profile don't always immediately translate to insurance premium reductions, since insurers may only reassess this factor at renewal, but consistent improvement over several renewal cycles tends to produce a more favorable rate.
What to do if you believe this factor is unfairly affecting your rate
If you've recently gone through a major life event — job loss, divorce, medical emergency — that negatively affected your credit, some states require insurers to consider these extraordinary circumstances when reviewing your credit-based insurance score. It's worth contacting your insurer directly and asking whether your state has any provisions for exceptional life circumstances, since this can sometimes result in a rate review that doesn't apply the adverse credit factor in the same way.
- Check whether your state permits the use of credit-based insurance scores in auto insurance pricing
- Review your standard credit report for errors that could be affecting both your credit score and insurance score
- Practice generally sound credit habits, since this benefits your credit-based insurance score as well as your standard credit score
- Ask your insurer directly whether and how this factor is affecting your specific premium
- If your credit has recently improved substantially, ask whether a mid-cycle rate review is available or wait until renewal for it to be reassessed
Frequently asked questions
Can checking my own credit hurt my insurance score?
No, checking your own credit report or score is a soft inquiry and doesn't negatively affect either your standard credit score or any credit-based insurance score calculated from similar underlying data. You can check your credit reports as frequently as you like without any negative consequence.
Does a thin credit history hurt my insurance score the same way it affects lending?
It can, since a limited credit history provides less data for either type of score to assess, potentially resulting in a less favorable insurance score classification until more credit history accumulates. Young drivers and recent immigrants who are just starting to establish credit often face this challenge on top of already higher age-related auto insurance rates.
If my credit improves, will my insurer automatically lower my premium?
Not necessarily — many insurers only reassess credit-based insurance scores at renewal rather than continuously. Some insurers offer a review upon request if you believe your credit has improved significantly since your last assessment, but this isn't universal. Comparison shopping at renewal is often the most reliable way to capture the benefit of an improved credit profile.