Insurance Read Time: 2 min
While the vast majority of insurance companies use credit-based insurance scores to help determine the price of insurance, it is banned in the states of Massachusetts, Michigan, Hawaii, and California. Some states only allow it as a factor for property insurance like auto and homeowners insurance. Other states allow it to be used with any type of insurance.1
Several Factors
Generally, an insurance company will use a credit-based insurance score as just one factor in its underwriting process. Other factors may be considered, depending on the type of insurance. For example, with auto insurance, other factors could include your zip code, the age of the driver, the make, model and age of the car, and the number of miles you drive annually.
The use of credit scores to determine insurance rates is rooted in research that has shown individuals with lower credit scores tend to file more claims.2
You can ask your insurance company if a credit-based insurance score was used to underwrite and rate your policy, and in which risk category you were placed.
If you want to improve your credit-based insurance score, you should consider taking the same steps you would to improve your credit rating: make timely debt payments, clear up past disputes, and keep credit card balances low.
1. Forbes, November 23, 2023
2. ValuePenguin.com, May 30, 2023
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.
FAQs
California
Insurance companies in California don't use credit-based scores or your credit history for underwriting or rating auto policies, or setting rates for homeowners insurance. As a result, your credit won't impact your ability to get or renew a policy, or how much you pay in premiums.
Do insurance companies look at your credit score? ›
California
Insurance companies in California don't use credit-based scores or your credit history for underwriting or rating auto policies, or setting rates for homeowners insurance. As a result, your credit won't impact your ability to get or renew a policy, or how much you pay in premiums.
Does credit score affect home insurance rates? ›
Typically, the higher your credit rating, the less you will pay for home insurance in the states where credit is considered a rating factor. Although it is only one factor in setting rates for home insurance, data shows that the credit-based insurance score is an important one.
Why does insurance care about credit score? ›
Most insurance companies use your credit history to help them decide whether to sell you insurance and how much it will cost.
Is health insurance affected by credit score? ›
In most states, insurers can use your credit-based insurance score to determine your premiums.
How much does credit score affect car insurance? ›
Four states — California, Hawaii, Massachusetts and Michigan — ban companies from using your credit report to determine insurance rates. Instead, companies in these states base rates on your driving record, location and other characteristics. You may also pay more for insurance if you don't have a credit history.
What states don't use credit scores for insurance? ›
Most major car insurance companies like GEICO, Progressive and State Farm factor in your credit score when giving you a quote. However, if you live in California, Hawaii, Massachusetts, or Michigan, you're in luck—these states don't allow credit history to affect your auto insurance rates.
What is a good homeowners insurance score? ›
Insurance scores range between a low of 200 and a high of 997. Insurance scores of 770 or higher are favorable, and scores of 500 or below are poor. Although rare, there are a few people who have perfect insurance scores. Scores are not permanent and can be affected by different factors.
What checks do insurance companies do? ›
What checks will your insurer carry out? Calculating an insurance quote can be a complicated process, and there are lots of different factors that insurers will take into account before issuing a new policy. These include previous convictions, details about your vehicle and your entitlement to drive.
Does homeowners insurance ever go down? ›
If you've kept your coverage with a company for several years, you may receive a special discount for being a long-term policyholder. Some insurers will reduce their premiums by 5 percent if you stay with them for three to five years and by 10 percent if you remain a policyholder for six years or more.
If your credit score is between 725 to 759 it's likely to be considered very good. A credit score of 760 and above is generally considered to be an excellent credit score. The credit score range is anywhere between 300 to 900. The higher your score, the better your credit rating.
How to increase your insurance score? ›
So the easiest way to improve your score is by improving your credit. A strong track record of on-time payments can boost your insurance score, as can lowering your ratio of outstanding debt to available credit and limiting the number of loan and credit cards you apply for.
Do medical bills go towards credit score? ›
Medical bills affect your credit score only if a collection agency gets involved. If you don't pay your bill and it becomes significantly past due, your health care provider may give up on collecting the debt from you and sell it to a collection agency.
Do insurance companies run your credit for a quote? ›
Some auto insurance companies use credit-based insurance scores to help them decide whether to offer someone an insurance policy and the premiums for the policy. These scores are based on one of your consumer credit reports. However, they're not the same as the credit scores that lenders use.
Do companies care about your credit score? ›
Though prospective employers don't see your credit score in a credit check, they do see your open lines of credit (such as mortgages), outstanding balances, auto or student loans, foreclosures, late or missed payments, any bankruptcies and collection accounts.
What is an insurance score based on? ›
Some key factors that may influence your insurance score are your previous credit performance, outstanding debt, credit history length and pursuit of new credit.
Does Progressive run a credit check? ›
Our software systems automatically request your credit report, so your Progressive representative does not see your credit report or know your insurance score.
