7 min read · Last updated August 28, 2026
- A credit-based insurance score is a separate model from your regular credit score, built from your credit report to predict claims risk instead of loan repayment.
- California, Hawaii, and Massachusetts are the only states that fully prohibit auto insurers from using credit history in underwriting or rating, per the National Association of Insurance Commissioners (NAIC).
- A 2007 Federal Trade Commission (FTC) study to Congress found that using these scores raised the average predicted claims risk for Black policyholders by 10% and for Hispanic policyholders by 4.2%, even in models that never directly used race.
- An Arkansas Insurance Department study of 3.4 million policies found credit-based scoring lowered the final auto premium 57.4% of the time and raised it in 23.4% of cases, roughly one in four.
In this article
- What a credit-based insurance score actually measures
- Why does driving record alone not set your premium?
- The three states where this can’t happen to you
- Check your renewal letter for the real reason
- Frequently asked questions
Warren Njoku hadn’t had an accident or a ticket in eleven years, one of the ten factors that typically shape an auto premium. When his auto renewal arrived showing his premium climbing from $1,140 to $1,410 a year, he called his agent expecting to hear about a rate filing or a coverage change. Instead, he learned his insurer had re-run his credit-based insurance score, and a stretch of medical debt from a hospital stay the year before had moved him into a lower-scoring tier.
Nothing about how he drove had changed. Something about his credit report had, and in Georgia, where Warren lives, that alone was enough.
What a credit-based insurance score actually measures
A credit-based insurance score pulls from the same credit report your lender sees, but it isn’t built to answer the same question. NAIC describes the two as serving entirely different purposes: “Traditional credit scores predict loan repayment, while insurance scores predict the likelihood of an insurance claim,” per NAIC’s own consumer resource on credit-based insurance scores.
NAIC’s page adds that an insurance score is “typically only one of many inputs insurers use, alongside factors such as claims history, driving record, property characteristics, location, coverage limits, and deductibles.” Your income, occupation, race, religion, and national origin are not part of the credit-based score itself.
That last point matters more than it sounds. A 2007 FTC report to Congress on credit-based insurance scores in auto insurance found that even without race as an input, using these scores raised the average predicted claims risk for Black policyholders by 10% and for Hispanic policyholders by 4.2%, compared to a model with no credit information at all, while it lowered predicted risk for white and Asian policyholders by 1.6% and 4.9% respectively. The same report reran the comparison with statistical controls for race, ethnicity, and neighborhood income built directly into the model, and the gap narrowed but never closed: predicted risk for Black and Hispanic policyholders still came out 8.9% and 3.5% higher, respectively, than it would have with no credit information used at all. The FTC’s own conclusion was that the scores remain strong risk predictors on their own statistical terms, but the disparity in outcome across race is real, measured, and worth knowing before you assume a low score is only about your own spending habits.
Why does driving record alone not set your premium?
Most states let insurers weigh dozens of factors beyond how you actually drive, and credit-based scoring is one of the most common. It isn’t random or punitive by design. An Arkansas Insurance Department study of 3.4 million policies found that using credit information lowered the final premium 57.4% of the time on auto policies specifically, and raised it in 23.4% of cases, roughly one in four. For most drivers, a credit-based score works in their favor. For the minority it doesn’t, the effect can show up exactly the way it did for Warren: a renewal increase that has nothing to do with a single mile driven that year.
The three states where this can’t happen to you
Location changes the math entirely. California’s rating rules limit insurers to just three mandatory factors, in order of importance: “the insured’s driving safety record,” “the number of miles he or she drives annually,” and “the number of years of driving experience the insured has had,” with any other factor requiring separate approval from the state’s insurance commissioner, per California Insurance Code Section 1861.02. Credit history has never been added to that approved list.
| State | Credit-based scoring in auto rating | Source |
|---|---|---|
| California | Fully prohibited | Cal. Ins. Code Section 1861.02 |
| Hawaii | Fully prohibited | NAIC government affairs brief |
| Massachusetts | Fully prohibited | NAIC government affairs brief |
| Michigan | Credit score itself banned since July 2020, though insurers may still use credit reports and related insurance-scoring models | 2019 Michigan no-fault reform |
| Most other states, including Georgia | Allowed, with some state-specific restrictions on how it can be used | State insurance codes vary |
The NAIC’s own government affairs brief confirms the short list directly: “A few states, Hawaii, Massachusetts and California have prohibited the use of credit history information in underwriting or rating for automobile insurance.” Michigan’s 2019 no-fault reform is a partial version of the same idea. Michigan’s own state government confirms the law “prohibits auto insurance companies from using sex, marital status, home ownership, credit score, educational level, occupation, and zip codes in setting your auto insurance rates,” per Michigan.gov. That ban names “credit score” specifically, and Michigan Public’s reporting has found insurers can still weigh credit reports and other credit-derived scoring models that fall outside that named term, which is one reason a credit-based rate gap has persisted in the state even after the ban took effect.
Check your renewal letter for the real reason
Before you assume a renewal increase means you had a claim or a violation you forgot about, ask your insurer directly whether your credit-based insurance score changed at renewal, and whether that change drove any part of the new premium. In most states, insurers are required to tell you if an adverse action, including a rate increase, was based even partly on your credit information, often through a written adverse action notice separate from the renewal bill itself. Read that notice, not just the bill, since it’s the document that names the actual reason.
If your credit has been recovering since a hospital stay, a period of unemployment, or any other setback, ask your agent whether a re-score is available before your next renewal rather than waiting for the annual cycle to catch up automatically. Some insurers only re-score at renewal; others will run it sooner if you ask. And if you’re weighing a move, remember that a credit-based insurance score follows the rating rules of the state you live in, not the one you moved from, so the exact same credit report can matter a great deal in one state and not at all in another.
Frequently asked questions
Is a credit-based insurance score the same as my regular credit score? No. Both draw from your credit report, but a regular credit score predicts how likely you are to repay a loan, while a credit-based insurance score predicts how likely you are to file an insurance claim. The two models weigh the same underlying credit data differently, and a strong credit score doesn’t guarantee an equally strong insurance score.
Which states ban credit-based insurance scoring for auto insurance? California, Hawaii, and Massachusetts fully prohibit insurers from using credit history in underwriting or rating personal auto insurance, according to the NAIC. Michigan bans the use of a credit score specifically but still permits related credit-report-based scoring models under its 2019 no-fault reform.
Can my auto insurance premium go up just because my credit score dropped? In most states, yes, if your insurer re-scores your credit at renewal and your score moved into a lower tier, even with no accidents or tickets on your record. Insurers are generally required to disclose when an adverse action was based on your credit information.
Does using credit information always raise premiums? No. A large 2017 Arkansas Insurance Department study found credit-based scoring lowered the final auto premium in the majority of policies reviewed, roughly 57%, and raised it in about one in four. Most drivers see a lower premium from the practice, not a higher one.
What can I do if my credit-based insurance score is hurting my premium? Ask your insurer whether a re-score is available before your next renewal, work on the same credit factors that improve a standard credit score (on-time payments, lower balances relative to your credit limits), and compare quotes from insurers whose scoring models may weigh your specific credit profile differently.
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