Guides
Credit-based insurance scores and car insurance
How insurers use credit-based insurance scores to price car insurance, which states ban or limit it, and your rights under federal and state law.
In most states, car insurers may use a credit-based insurance score, a number built from parts of your credit report, as one of the factors that sets your premium, because statistically it predicts how likely you are to file claims. California, Hawaii and Massachusetts do not allow credit to be used in auto pricing, and Michigan, Maryland and Oregon restrict how it can be used. Federal law gives you the right to be told when your credit led to a higher price.
What an insurance score is
An insurance score is not the same as the FICO or VantageScore a lender sees, though it is calculated from the same credit report. Insurance scoring models weigh things like payment history, how much of your available credit you use, the length of your credit history, recent applications for credit and the mix of accounts. They are built to predict insurance losses, not loan defaults. State laws often limit what the models may consider; Michigan's, for example, bars income, gender, address, ZIP code, ethnic group, religion, marital status and nationality from the calculation (MCL 500.2153).
When an insurer checks your credit for a quote it is a "soft" inquiry and does not affect your lending scores.
Why insurers use it, and why critics object
The Federal Trade Commission studied the question at Congress's request. Its July 2007 report found that credit-based insurance scores are effective predictors of risk under auto policies, that scores are distributed differently among racial and ethnic groups in ways likely to affect what those groups pay on average, and that scores appear to derive only a small amount of their predictive power from correlation with race and ethnicity. The FTC could not build an alternative model that predicted risk as well while narrowing the differences between groups.
Insurers say scoring lets them charge lower-risk customers less. The Insurance Information Institute cites a 2017 Arkansas Insurance Department report on 2016 policies: credit information lowered the premium on 57.4% of auto policies and raised it on 23.4%. Consumer groups counter that scoring penalizes people for medical debt, divorce, job loss and other events unrelated to how they drive, and that its effect falls hardest on lower-income households.
Where credit is banned or limited
State laws, verified against each state's statute or regulator:
| State | Rule for private passenger auto |
|---|---|
| California | Insurers do not use credit to underwrite or rate auto policies (Experian, March 2025); under Proposition 103 rates must rest on three mandatory factors plus optional factors the commissioner approves, and using an unapproved criterion is unfair discrimination (Ins. Code 1861.02) |
| Hawaii | No rating or underwriting standard may be based on a "credit bureau rating" (HRS 431:10C-207) |
| Massachusetts | Rates may not be based in whole or in part on credit information, and insurers may not refuse to issue or renew based on it (c. 175E, s. 4) |
| Michigan | Since 2019, insurers may not use your credit score (the 300 to 850 number) to set auto rates (MCL 500.2162), and may not use credit information or an insurance score to deny, cancel or non-renew. State law still defines and regulates separate "insurance scores," so ask your insurer what it uses. |
| Maryland | Credit may be used to rate a new policy, but not to refuse, cancel, non-renew or raise a renewal premium; the credit discount or surcharge is capped at 40% and factors older than five years cannot be used (Ins. 27-501) |
| Oregon | No cancellation or non-renewal based on credit after a policy has been in force 60 days; you may ask to be re-rated once a year (ORS 746.661) |
Other states have their own disclosure and re-scoring rules, and legislation changes often; check the regulator through our state guides or the state car insurance requirements lookup.
Common consumer protections
Even where credit is allowed, state laws often include protections like these, all found in Michigan's statute:
- The insurer must disclose that it may use credit information.
- The credit report must be recent (within 90 days in Michigan) when the score is first applied.
- You can ask to be re-scored, typically once a year at renewal.
- Medical collection accounts, insurance-related inquiries and multiple mortgage or auto-loan inquiries within a short window cannot count against you.
- Having no credit card account cannot by itself be held against you.
Oregon adds that an insurer may not re-rate you on credit when your marital status changes because of a death or divorce, and Maryland requires insurers to review the credit of policyholders who were rated up at least every two years.
Your federal rights
Under the Fair Credit Reporting Act, an "adverse action" in insurance includes "an increase in any charge for" coverage based on a consumer report (15 U.S.C. 1681a). If your credit-based score led to a higher premium than you would otherwise get, the insurer must send an adverse action notice naming the credit bureau and telling you of your right to a free copy of your report within 60 days and to dispute errors (15 U.S.C. 1681m).
How to limit the effect of credit on your premium
- Read any adverse action notice and get the free report it offers. Errors such as accounts that are not yours are fixable.
- Dispute inaccuracies with the credit bureau, then ask your insurer to re-score you.
- Ask for a re-rate at renewal once your credit improves. Some states require insurers to do this on request.
- Keep paying on time and keep revolving balances low; these are the components most scoring models weigh heavily.
- Tell your insurer about extraordinary events such as serious illness, a death in the family, divorce or job loss, and ask whether it will make an exception. Rules differ by state; Oregon, for one, bars re-rating on credit when a death or divorce changes your marital status.
- Shop around. Insurers weigh credit very differently, and some use it lightly or not at all. Compare like-for-like quotes with the car insurance quote comparison worksheet; J.D. Power reported in 2025 that customers with lower credit-based scores were shopping more actively, according to Insurance Journal.
Credit is one of many rating factors; the full picture is in how car insurance rates are calculated.
Key takeaways
- A credit-based insurance score predicts claims, not loan default, and is one factor among many in most states.
- California, Hawaii and Massachusetts bar credit in auto pricing; Michigan bars the credit score itself and restricts other credit use; Maryland and Oregon limit how it can be used.
- The FTC found scores predictive of risk but unevenly distributed across racial and ethnic groups.
- If credit raised your price, federal law entitles you to a notice, a free credit report and the right to dispute errors.
- Improving your credit and asking to be re-scored at renewal can lower your premium where credit is used.