Auto

How Insurers Use Credit Scores When Setting Auto Insurance Rates

Most states allow insurers to factor credit history into premiums. Learn what an insurance-based credit score is and how it differs from a lending score.

Auto Editorial Team
7 min read · Oct 7, 2025
How Insurers Use Credit Scores When Setting Auto Insurance Rates
—— In This Article
  1. Why insurers look at credit history
  2. How a credit-based insurance score is built
  3. Where the practice is restricted or banned
  4. What you can do with this information

Key Takeaways

  • Most U.S. states allow auto insurers to use credit-based insurance scores when setting premiums.
  • A credit-based insurance score uses the same raw credit data as a lending score but weights factors differently.
  • Checking your own credit score does not affect your insurance pricing.
  • California, Hawaii, Massachusetts, and Michigan ban or sharply restrict this practice.
  • Improving your general credit health over time can influence what insurers charge.

Why insurers look at credit history

Auto insurers price policies based on how likely a given driver is to generate a claim. Traditionally, that meant looking at driving record, vehicle type, and location. Over time, many insurers added credit history to that mix after internal studies suggested a statistical relationship between certain credit patterns and claim frequency.

The practice is general financial information, not a judgment about your character, and what follows is an explanation of how it works, not personalized financial or insurance advice. Terms vary by insurer and state, and reading actual policy documents or talking with a licensed insurance agent is the right step for your specific situation.

If your premium went up without any change in your driving habits, factors beyond credit can also play a role. See why car insurance rates can increase without any fault of your own for a broader breakdown.

How a credit-based insurance score is built

A credit-based insurance score (CBIS) pulls data from the same credit file a lender would see, but the mathematical model is different. Scoring companies weight the inputs to reflect claim behavior rather than loan repayment behavior.

Side-by-side diagram of a lending credit score gauge and an insurance credit score gauge showing different scales
Lending scores and insurance scores use the same raw data but weight factors differently.

The factors that typically carry the most weight in a CBIS include:

  • Payment history, including late or missed payments
  • Total outstanding debt relative to available credit
  • Length of credit history
  • Number of recent applications for new credit
  • Mix of account types

Insurers do not see your income, employment status, or demographic information through this channel. Federal law under the Fair Credit Reporting Act governs how these scores can be used, and if an insurer takes an adverse action based partly on credit, it must notify you.

46 states

States where credit scoring in auto insurance is permitted

As of the mid-2020s, the majority of U.S. states allow insurers to use credit-based insurance scores; four states ban or significantly restrict the practice.

3 major bureaus

Credit bureaus that supply data for CBIS models

Equifax, Experian, and TransUnion all provide the underlying credit file data that scoring companies use to calculate credit-based insurance scores.

Where the practice is restricted or banned

State law governs whether and how a CBIS can be used. California, Hawaii, Massachusetts, and Michigan do not allow insurers to use credit information in auto rate-setting. Drivers in those states are priced on other factors entirely.

Several other states allow the score but place limits on it: for example, requiring insurers to periodically re-check scores, prohibiting its use as the sole reason for a rate increase, or mandating exceptions for consumers facing documented hardship. Your state insurance department's website is the authoritative source for local rules.

What you can do with this information

Because a CBIS draws on your credit file, habits that build healthier credit over time can eventually affect what insurers see. Paying bills on time, keeping credit card balances well below their limits, and avoiding unnecessary new credit applications are the same practices that support a stronger lending score.

Checking your own credit report through AnnualCreditReport.com lets you spot errors before an insurer does. Disputing inaccurate items is a right under the Fair Credit Reporting Act.

Credit is one factor among many. Driving record, annual mileage, vehicle make, and geography all feed into your final premium as well. Some drivers prefer programs that price based on actual driving behavior instead. Usage-based and pay-per-mile programs work differently and may suit drivers with strong habits but thinner credit histories.

If you carry multiple policies, bundling can also affect your overall costs. Bundling home and auto insurance changes how coverage is structured, which is worth understanding before you combine policies.

This article is for general informational purposes only and is not personalized insurance, financial, or legal advice. Coverage terms, pricing factors, and state regulations vary. Consult a licensed insurance agent or your state insurance department for guidance specific to your situation.

Frequently Asked Questions

No. When you check your own credit, it counts as a soft inquiry, which does not appear on the report insurers review. Only hard inquiries from new credit applications can affect a lending score, and even those have no direct role in how an insurer calculates a credit-based insurance score.
California, Hawaii, Massachusetts, and Michigan prohibit or substantially restrict insurers from using credit information to set auto rates. A handful of other states limit how and when the data can be applied. If you live in one of these states, credit history plays little or no role in your premium.
Payment history, the age of your credit accounts, outstanding balances, and the number of recent credit applications all feed into a credit-based insurance score. The exact weighting varies by the scoring model the insurer licenses.
In states where credit scoring is permitted, insurers are generally not required to disregard it. Some states do require insurers to offer an exception for consumers who experienced specific hardships, such as a death in the family or a job loss. Check your state insurance department's website for local rules.
Both draw on your credit file, but they serve different purposes and use different formulas. A FICO score is built to predict whether you will repay a loan. A credit-based insurance score is built to predict claim frequency. The same credit profile can produce very different numbers on each scale.
Auto Editorial Team

Auto Editorial Team

Auto Editorial Team is the collective byline for our editorial team and contributor network. Articles published under this byline or an editorial pen name are researched, written, and reviewed according to our editorial standards for clarity, consistency, and independence before publication.

View author profile
The content provided on our blog site traverses numerous categories, offering readers valuable and practical information. Readers can use the editorial team’s research and data to gain more insights into their topics of interest. However, they are requested not to treat the articles as conclusive. The website team cannot be held responsible for differences in data or inaccuracies found across other platforms. Please also note that the site might also miss out on various schemes and offers available that the readers may find more beneficial than the ones we cover.