What Is an Insurance Credit Score?

Insurance companies review many factors when setting car insurance premiums, including your insurance credit score.

Credit-based insurance scores use your credit history but differ from traditional credit scores. They demonstrate how well you manage money and help insurers predict how likely you are to file a claim. Most states allow insurance companies to consider your insurance credit score when setting rates, but several states prohibit or restrict this practice.^[1]

Here’s what you need to know about insurance credit scoring, the effect it has on car insurance rates, and how to improve your score.

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What is an insurance credit score?

An insurance credit score is a number based on your credit history that insurance companies use to predict how likely you are to file a claim. It isn’t the same as a financial credit score, but it does have some of the same characteristics as credit reports.

Depending on where you live, insurance companies may be able to use insurance credit scores as one of many rating factors in assessing risk. In other words, the insurer considers how likely it is to experience a loss (a claim) based on your credit history.

Drivers with bad credit are more likely to pay higher premiums. But insurers also consider other factors when determining your rates, like your ZIP code, your age, the vehicle you drive, and your driving record.^[2]

Still, in states where insurance credit scores are allowed, a 30-year-old driver in Texas with poor credit will likely pay higher car insurance premiums than a similar driver with excellent credit — even if all other factors are the same.

Factors that determine your credit-based insurance score

Insurers can choose from several credit-based insurance risk scoring models to check your score. While the exact factors included in each scoring model vary by insurer, the FICO model, which insurers commonly use, looks at five risk predictors:

• 

  Payment history

  Your track record of paying bills on time makes up 40% of your insurance credit score.

• 

  Outstanding debt

  The amount of debt you currently owe to creditors makes up 30% of your insurance credit score.

• 

  Credit history length

  How long you’ve used credit, including the age of your oldest account, makes up 15% of your score.

• 

  History of opening new accounts

  Applying for new accounts frequently may indicate you’re financially stretched or don’t use credit responsibly. This history makes up 10% of your credit-based insurance score.

• 

  Credit mix

  While the types of accounts you have, like credit cards, car loans, and mortgages, factor into your score, they carry a weight of only 5%.

Insurance-scoring models are prohibited from factoring personal information into your score, such as race, religion, gender, national origin, marital status, age, occupation, income, employment history, or where you live.

How insurance companies use credit-based scores

Insurers aren’t allowed to access your actual credit score. But in most states, insurers can use credit-based insurance scores to help determine how likely a policyholder is to file insurance claims. In other words, credit-based insurance scores are an indicator of how much financial loss you might cause the company.

Industry data shows that drivers with solid financial management habits — as reflected by a high credit-based insurance score — are less likely to file an insurance claim. But drivers with lower insurance credit scores tend to be higher risk for filing claims.^[3]

Insurers can’t use your credit-based insurance score to deny coverage. But your score will likely affect your premium.

In states where credit-based insurance scores are allowed, an estimated 95% of insurers use them to help determine rates. Insurance companies also look at other risk factors when setting rates, such as any past driving incidents on your record, your claims history, your age, and the make and model of your vehicle.

How credit-based scores affect premiums

Generally speaking, the better your insurance score is, the better your rates will be. And since your credit history heavily affects your insurance credit score, the best premiums tend to go to drivers in the excellent credit tier.

See below for the average insurance costs for drivers with excellent credit compared to drivers with poor credit.

Credit Tier	Average Full-Coverage Premium	Average Liability-Only Premium
Poor	$218	$123
Excellent	$157	$89

Disclaimer: Table data sourced from real-time quotes from Insurify's 500+ partner insurance providers. Actual quotes may vary based on the policy buyer's unique driver profile.

Where insurance credit scores are banned or restricted

Seven states either prohibit or limit the use of insurance scores in setting policy premiums. But the rules are sometimes different for car insurance and homeowners insurance. Other states ban insurers from using insurance credit scores as the sole basis for canceling, denying, or not renewing a policy or for increasing insurance rates.

Here’s a look at the states that have bans or limits on the use of insurance scores in insurance pricing. If your state isn’t in the table below, check with your state’s insurance department to determine how insurance credit scores can affect your policy premiums.

State	Status	What This Means
California	Banned for auto insurance policies; restricted for home insurance policies	California insurers can’t use insurance credit scores as part of their underwriting standards or rating plans for auto insurance policies or homeowners policies.
Hawaii	Banned for auto insurance policies	Hawaii insurers can’t use insurance credit scores in underwriting or pricing auto policies, but they can consider your score for homeowners insurance.
Maryland	Restricted for both auto and home insurance policies	Maryland home insurers can’t use insurance scores to deny coverage, cancel coverage, refuse renewal, or set rates for a policy. Auto insurers can use scores only when setting prices on new policies.
Massachusetts	Banned for auto insurance policies; restricted for home insurance policies	Massachusetts auto insurers can’t use any credit information when underwriting policies, renewing policies, or setting rates. Home insurers can’t use credit-based insurance scores in rate setting.
Michigan	Restricted for auto and home insurance policies	Michigan insurers can’t use credit-based insurance scores to cancel, deny, or refuse renewal of home or auto insurance coverage. Auto insurers can’t use scores when setting rates.
Oregon	Restricted for auto and home insurance policies	Oregon insurers can use credit-based insurance scores when considering your initial application, but not to cancel or refuse to renew a policy. They can consider only certain credit information.
Utah	Restricted for auto insurance policies	Utah auto insurers can use credit-based insurance scores only when considering your initial application, but other factors must also be considered. In price setting, insurance credit scores can be used only to offer premium discounts, not to charge more. Additionally, after 60 days, insurers can’t use insurance credit scores to cancel or refuse renewal of coverage.

How to improve your insurance credit score

Improving your insurance credit score may help you lower your car insurance premium. Since your credit history usually informs your credit-based insurance score, start by reviewing your credit reports.

You can check your credit reports and determine your credit score at AnnualCreditReport.com.

Depending on what you see on your report, here are some ways you may be able to improve your insurance score:

• Pay bills on time. Even just one late payment can hurt your credit score and, in turn, your credit-based insurance score. Consider setting up automatic payments for recurring bills if possible.

• Reduce outstanding debt. The amount of outstanding debt you have accounts for 30% of your standard credit scores and your insurance credit scores. Pay down your balances to help increase your scores.

• Limit new credit applications. The more you apply for new credit — especially in a short period of time — the more it can hurt both your credit scores and insurance credit scores. Try to keep your applications for new credit to a minimum.

• Keep old accounts open to build history. Even if you’ve paid off an account, you may want to keep it open. A longer credit history will have a positive effect on your credit scores and your credit-based insurance scores.

• Diversify your credit mix. Although the effect is typically small, having different types of open credit, like loans and credit cards, can help improve your scores.

• Review your credit report regularly for errors. Inaccurate information can hurt both your credit scores and insurance credit scores. Check your credit reports regularly and dispute any incorrect account data.

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Insurance scores vs. credit scores

Insurance scores and credit scores are both based on your credit history. But only credit-based insurance scores can potentially help insurers determine your risk profile and pricing. Remember, insurance companies can’t consider your actual credit score. But they can consider your insurance credit score in states where it’s permitted.

Insurance scores are predictors of insurance losses, meaning the likelihood that you’ll file a claim. In states where it’s legal, insurance companies can use them as underwriting criteria and to determine pricing for car insurance. They can also sometimes be used for homeowners insurance.

Standard credit scores, on the other hand, help creditors predict your likelihood of repaying a debt. Creditors commonly use them to make underwriting decisions for loans, lines of credit, and other similar products.^[4] Improving your overall credit history generally improves your credit-based insurance score as well.

Insurance credit score FAQs