How Your Credit Score Affects Insurance Rates (and What to Do About It)

Your Credit Score Follows You to Your Insurance Agent

Most people understand that credit scores affect loan interest rates and credit card approvals. Fewer realize that in most U.S. states, your credit score also plays a significant role in determining what you pay for auto and homeowners insurance — sometimes dramatically so.

Insurance companies have collected decades of data demonstrating a statistical correlation between credit score and insurance claim likelihood. A consumer with poor credit statistically files more claims and for larger amounts than a consumer with excellent credit, regardless of driving record. Insurers call this metric a "credit-based insurance score" — and it's different from your FICO score, though both draw from the same credit report data.

Credit-Based Insurance Score vs. Your FICO Score

Your FICO credit score and your credit-based insurance score use similar data but weight it differently:

The insurance score places extra weight on factors insurers find most predictive of claim behavior: payment history and collections. It's calculated by insurance-specific scoring models (LexisNexis Attract, TransUnion CreditVision, FICO Insurance Score) rather than the standard FICO models used by lenders.

Insurers don't disclose the exact formula, but you can request a summary of the factors affecting your insurance score if you're declined or receive an adverse action notice.

The Rate Impact: How Much Credit Score Actually Costs You

The financial impact of credit score on insurance is substantial — potentially more than any other single rating factor other than major accident history. The following table shows approximate premium differences for a standard auto policy (full coverage, $500 deductible) based on credit score tier:

The difference between exceptional and poor credit can exceed $2,000 per year for a single auto policy. For homeowners insurance, the differential can be even larger in some markets.

Important: These differentials vary by state and carrier. Some carriers weight credit more heavily than others. Shopping multiple carriers is essential because your credit score may be significantly more penalized at one company than another.

The 4 States That Ban Credit-Based Insurance Scoring

Four states prohibit insurers from using credit information as a factor in auto or homeowners insurance pricing:

Residents of these states are rated on factors like driving record, vehicle type, location, and claims history — but not credit. If you live in one of these states, this article is less directly relevant to your insurance premiums, though it remains relevant for any credit-dependent financial product.

Several other states (Maryland, Oregon, Utah, and others) have partial restrictions — prohibiting credit scoring as the sole basis for adverse actions or requiring additional qualifying factors.

The Controversy: Is Credit-Based Insurance Scoring Fair?

The practice is well-established legally and statistically supported, but it remains controversial for several reasons:

The regulatory landscape is gradually evolving. Several states have introduced legislation to restrict or require transparency in credit-based insurance scoring, and the practice is under ongoing review by state insurance commissioners.

Soft Inquiries vs. Hard Inquiries: Shopping for Insurance

When you request an insurance quote, insurers check your credit using a soft inquiry — this does not affect your FICO score. You can shop for insurance as aggressively as you want without harming your credit rating.

This is distinct from mortgage shopping or auto loan rate-shopping, where multiple hard inquiries within a short window are grouped into a single inquiry for scoring purposes. Insurance quote inquiries have no impact on your credit, period.

7 Strategies to Improve Your Insurance-Relevant Credit

Improving your credit profile will lower your insurance premiums at your next renewal period. Insurers typically re-run credit at each renewal (annually in most states). Here are the highest-impact actions:

How to Leverage Credit Score Improvements at Renewal

Most insurers automatically re-run credit at each policy renewal. If your score has improved significantly since your last renewal, proactively call your insurer and ask about credit re-evaluation. Some companies require an explicit request rather than automatically applying improved credit.

If you've improved your score by 50+ points, shopping for new policies is often worthwhile — new-business rates are sometimes more competitive than renewal rates even for the same credit profile.