Where Your Credit Score Can and Can't Raise Your Insurance Costs

Lawmakers in several states are trying to change laws that allow insurance companies to access Americans' credit histories to determine coverage costs, a practice that causes individuals with low credit scores to pay higher premiums.

The practice is currently banned in a handful of states, but bills to prohibit the use of a customer's credit history to determine their homeowners or auto insurance policies-or both-are pending in Iowa, New York, Oklahoma, and Pennsylvania.

How Do Insurance Companies Use Your Credit History?

In most states, insurance companies can set premiums based on a customer’s credit-based insurance score, which is determined by firms like FICO and TransUnion through an analysis of an individual's credit history.

FICO, for example, looks at five factors to determine a customer's credit-based insurance score: payment history (40 percent), outstanding debt (30 percent), credit history length (15 percent), pursuit of new credit (10 percent), and credit mix (5 percent).

A low credit score is usually interpreted as a higher likelihood that the customer will file a claim, while a high credit score is associated with a lower likelihood of doing so. The higher the likelihood, the higher the insurance premiums.

A credit-based insurance score is not the same as an individual's credit score, and it is only one of several factors insurance companies consider in their underwriting process. But a low credit score can give you an idea of how your credit-based insurance score might be, according to NerdWallet.

A recent study from the National Bureau of Economic Research found that homeowners with low scores pay 24 percent more than high-scoring homeowners for identical coverage. A March report from NerdWallet estimated that drivers with poor credit pay insurance rates that are, on average, 69 percent higher than those with better credit, forcing them to pay $1,601 more.

States That Ban Use of Credit-Based Insurance Scores

Only a few states ban the use of a customer's credit history to determine their insurance rates for either homeowners and/or drivers policies.

California and Massachusetts ban the use of credit history by insurance companies in coverage decisions involving homeowners and auto insurance. In these states, a homeowner's and/or driver's credit score will not impact their premiums or their capacity to get a policy renewed.

In Michigan, insurance companies cannot use a customer's credit history or a credit-based insurance score as part of their decision-making process to deny, cancel or refuse to renew an auto or homeowners policy. They are also prohibited from using a customer's credit score to determine rates, though they may use it when deciding which installment payment options to offer for their policy.

Hawaii forbids its use for auto insurance only, while credit-based scores can be used to determine homeowners insurance premiums.

Maryland bans the use of credit history for coverage decisions involving homeowners policies only, but companies can rely on it to decide on drivers' coverage. Insurance companies cannot use a customer's credit-based insurance score to deny their initial application, cancel a policy, refuse to renew their policy or increase their premiums during a renewal.

States That Heavily Restrict the Practice

While the practice is not banned outright, there are severe restrictions on it in Oregon, as well. Insurance companies in the state cannot base their decision to cancel or refuse to renew an insurance policy based on a customer's credit, even as they can use it when deciding to offer them a policy in the first place.

This use also has some limitations: companies can only consider certain information from a customer's credit report when underwriting and rating their policy.

In Utah, insurance companies may consider a customer's credit history when underwriting an auto policy, provided it is not the sole factor in the decision. After 60 days into the policy, they cannot use a customer's credit history to refuse renewal or cancel it.

States Considering Banning the Practice

A bill moving through the Iowa legislature would prohibit an insurer authorized to do business in the state from using credit information to underwrite or rate risks for a motor vehicle financial liability coverage policy.

In New York, Assembly Bill A10524A wants to forbid insurance companies from using a driver's credit score to refuse to issue or renew an auto insurance policy or to decide their rates and how they need to pay them. The proposal would also ban the use of a customer's age, employment status, level of education, homeownership status or property value and past insurance policies.

Oklahoma state senators are trying to pass a bipartisan bill introduced in February, SB 1435, which would prohibit insurance companies from using credit scores to set insurance rates for homeowners.

In Pennsylvania, HB 657 would forbid insurers from using a customer's credit history as a basis to deny, provide a higher premium than otherwise, cancel or refuse to renew or raise the premium of personal insurance or life insurance.

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This story was originally published April 28, 2026 at 6:55 AM.