Does Your Credit Score Affect Your Insurance Premiums?

What a Credit-Based Insurance Score Actually Is

Yes — in most states, your credit history affects what you pay for auto and homeowners insurance. The mechanism is a credit-based insurance score, and it's not the same thing as the FICO or VantageScore number your lender checks. Per the (https://content.naic.org/insurance-topics/credit-based-insurance-scores), a credit-based insurance score is built to estimate how likely you are to file a claim — not how likely you are to repay a loan. It draws from the same underlying credit-report data as a traditional credit score, but the pieces are weighted differently, and it's rarely the only factor behind your premium. Insurers layer it in alongside your claims history, driving record, property details, location, and the coverage limits and deductibles you pick.

It's more common than most people realize, too. Per FICO's own estimates, cited by (https://content.naic.org/insurance-topics/credit-based-insurance-scores), about 95% of auto insurers and 85% of homeowners insurers use a credit-based score wherever it's legal to do so.

What Feeds the Score

The exact formula is proprietary, and it varies by insurer and by vendor — FICO, TransUnion, and LexisNexis all produce competing versions. But (https://www.experian.com/blogs/ask-experian/why-do-car-insurance-companies-base-their-rates-on-credit-scores/) notes it's built from largely the same raw material as your credit score, just weighted for claim risk instead of repayment risk. FICO's own insurance-scoring model, (https://www.nerdwallet.com/insurance/auto/learn/credit-based-insurance-score), weighs payment history at 40%, outstanding debt at 30%, length of credit history at 15%, new credit applications at 10%, and credit mix at 5%. Same broad categories that move your FICO score, just in different proportions. If you've read up on (/fico-factors-explained-what-really-moves-your-score) before, you already understand most of what goes into this number too.

How Much It Can Actually Move Your Premium

The dollar impact is bigger than most people expect. NerdWallet's August 2026 analysis found that drivers with poor credit pay about 67% more, on average, than drivers with good credit for full-coverage auto insurance — a gap of roughly $1,580 a year ($3,936 versus $2,356). For minimum-coverage policies, the gap shrinks in dollar terms but it's still real: about $374 a year ($1,020 versus $646).

Company-by-company, the swing is even wider. Insurance.com's national data puts the average good-credit premium at $2,874 a year versus $12,536 for poor credit — a $9,662 gap. That gap isn't uniform across insurers, though. Nationwide showed one of the smallest credit-based swings in the data, about 46% ($1,131), while GEICO and Progressive landed in the 70-72% range. State Farm showed the widest gap of the companies compared, at roughly 336%. Same credit file, wildly different price tags, depending entirely on which insurer is doing the pricing.

Homeowners insurance works the same way in principle — a credit-based score feeding into the rate alongside your home's characteristics and claims history — though the size of the effect tends to vary just as much by company as it does for auto coverage. The practical lesson either way: don't assume the "average" gap applies to your specific insurer. Getting quotes from more than one company is usually worth the twenty minutes before you assume your credit is the deciding factor.

Which States Ban or Restrict This Practice

This isn't legal everywhere, and the map is more fragmented than a lot of people assume. According to Experian's state-by-state breakdown, seven states currently restrict or prohibit credit-based insurance scoring in some form:

• California — bars the use of credit-based scores or credit history entirely, for both auto and homeowners insurance. If you live in California, (/california-credit-repair-law) backs you up here regardless of what your credit file looks like.
• Massachusetts — prohibits auto insurers from using credit information to set rates, underwrite, or renew policies, and bars it for homeowners rates too.
• Michigan — bars insurers from using credit to deny, cancel, or refuse to renew a policy, and bars auto insurers from using it to set rates at all.
• Hawaii — bans auto insurers from using credit for underwriting or rating, but still allows it for homeowners coverage.
• Maryland — bars homeowners insurers from basing coverage or rates on credit; auto insurers face restrictions on denials and non-renewals but can still use credit for initial rate-setting.
• Oregon — bars insurers from cancelling or refusing to renew a policy based on credit, but allows it for initial underwriting.
• Utah — allows credit at initial underwriting, but after the first 60 days of coverage, an insurer can only use it to justify a discount — never a rate increase, cancellation, or non-renewal.

Even outside these seven states, most states prohibit insurers from using a credit-based score as the sole reason to deny, cancel, or refuse to renew your policy. Many also require the insurer to notify you when your credit contributed to an adverse decision.

2026 has been an active year on this front. (https://www.cnbc.com/2026/04/26/insurance-rates-credit-history.html) that bills are pending in several state legislatures — including Iowa, New York, Oklahoma, and Pennsylvania — that would prohibit or further restrict insurers from using credit history to set auto or homeowners premiums. Iowa's House File 2259, introduced in February 2026, would bar any insurer from using credit information to underwrite or rate auto liability coverage, and it's already passed its House committee. At the federal level, Senator Elizabeth Warren and Representative Ayanna Pressley, joined by roughly twenty other lawmakers, sent letters to six major insurers — USAA, State Farm, Progressive, Liberty Mutual, Farmers, and Allstate — demanding disclosure of exactly how credit-based scoring shapes their underwriting and pricing. If you're in a state without a restriction today, keep an eye on your legislature. This list has been growing.

What You Can Do This Week

Here's the good news: a credit-based insurance score responds to the same habits that improve your regular credit score, so you're not managing two separate projects.

• Pay on time, every time. (https://www.experian.com/blogs/ask-experian/why-do-car-insurance-companies-base-their-rates-on-credit-scores/) calls this the single most important factor for both your credit score and your insurance score, and the FICO weighting above backs that up — payment history is 40% of the insurance model.
• Lower your revolving balances. Outstanding debt is the second-heaviest factor. Paying down credit card balances relative to your limits helps both scores at once.
• Don't open new credit you don't need. Each hard inquiry can ding your score temporarily, and new-credit activity is part of the insurance model too.
• Pull your credit reports and dispute errors. An inaccurate late payment or a collection that isn't yours can drag down both your FICO score and your insurance score. If something looks off, (/how-to-dispute-an-inaccurate-late-payment) before it costs you at renewal.
• Ask your insurer directly. Find out whether they use a credit-based score, and check whether your state restricts how they can use it. The rules above vary enough that a five-minute phone call is worth making.
• Shop around. Since the size of the credit-based gap varies so much by company — from under 50% at some insurers to over 300% at others — a credit-challenged applicant often has more to gain from comparing quotes than from any single credit move.

If your credit file needs more than a few tweaks — old collections, disputed accounts, or a report you haven't reviewed in a while — (/#top-companies) is a reasonable next step before your next renewal.

Frequently Asked Questions

Is a credit-based insurance score the same as my FICO credit score?

No. Both draw on your credit report, but a credit-based insurance score is built to predict how likely you are to file a claim, while your FICO or VantageScore credit score predicts how likely you are to repay a loan. You can have a strong credit score and still see a worse insurance score if an insurer's model weights your file differently.

Which states don't allow insurers to use credit history?

California, Massachusetts, and Michigan bar the practice most broadly for auto and/or homeowners coverage. Hawaii, Maryland, Oregon, and Utah restrict it more narrowly — Utah, for instance, lets insurers use credit only to justify a discount, never a rate increase, after the first 60 days of a policy. Several more states, including Iowa, New York, Oklahoma, and Pennsylvania, have bills pending in 2026 to add new restrictions.

Can an insurer cancel my policy just because my credit score dropped?

In most states, no. Insurers generally can't use a credit-based insurance score as the sole reason to deny, cancel, or refuse to renew your policy, and many states require them to notify you when credit contributed to an adverse decision. Check your state's specific rule — a handful of states allow more latitude than others.

Will improving my credit score lower my insurance premium?

It can, though the timeline and the size of the effect depend on your insurer and your state. Paying bills on time, lowering revolving balances, and disputing credit-report errors are the same moves that improve a FICO score, and they typically improve a credit-based insurance score too. Insurers just don't all re-score policies on the same schedule.

Does checking my own credit score hurt my insurance rate?

No. Checking your own credit report or score is a soft inquiry and has no effect on your credit-based insurance score or your FICO score. Only certain new-credit applications that trigger a hard inquiry can have a small, temporary effect.

The Bottom Line

For most drivers and homeowners, credit is quietly one of the bigger levers on what you pay for insurance — sometimes a bigger swing than a moving violation. How much it matters, and whether an insurer can use it at all, depends on your state and which company is pricing your policy. Seven states already restrict the practice, several more have bills moving through 2026 legislative sessions, and Congress is now asking insurers to explain themselves directly. Until the rules settle, the most reliable move is the same one that helps everywhere: keep your credit file clean, and (/#top-companies) before you assume the number you were quoted is the best one available.