In this guide

In most states, your credit history can affect what you pay for car insurance. Many insurers use a credit-based insurance score, built from your credit report, as one of several factors in setting your rate. Drivers with weaker credit often pay more. As of 2026, California, Hawaii and Massachusetts ban the use of credit in auto insurance, and several other states, including Michigan and Maryland, limit how insurers can use it.

Key takeaways

  • A credit-based insurance score is not the same as the credit score lenders use. It's designed to predict insurance claims, not loan repayment.
  • It's built from your credit report, such as payment history and debt. Insurers and score developers say it doesn't use income, gender, religion or other personal traits.
  • California, Hawaii and Massachusetts don't allow credit to be used in auto insurance. Michigan, Maryland, Oregon and Utah restrict it.
  • If credit leads to a higher rate, federal law generally requires the insurer to tell you and to let you get a free copy of your report.
  • Paying bills on time, keeping balances low and fixing report errors may help over time.

What a credit-based insurance score is

A credit-based insurance score uses information from your credit report to estimate how likely you are to file an insurance claim. As the NAIC explains, it's meant to predict claims, not whether you'll repay a loan. Insurers often weigh credit factors differently than lenders do, so your insurance score may not match the score you see on a banking app.

Insurers use these scores in two main ways. In underwriting, the score can help decide whether to offer you a policy or which company tier you're placed in. In rating, it can help set your premium. Your score is usually just one factor alongside your driving record, claims history, vehicle, location and coverage choices. For more on how premiums are set, see how car insurance works.

What goes into the score

Each scoring model is different, but according to Wisconsin's Office of the Commissioner of Insurance, insurance scores are built from weighted factors in your credit report, such as:

  • Payment history, including late payments
  • Major negative items, such as bankruptcies, collections and foreclosures
  • Outstanding debt and balances
  • Length of your credit history
  • Recent applications for new credit
  • The number and types of credit accounts you have

The same source says insurers and score developers report that income, gender, marital status, religion, nationality, age and property location are not used in their scoring models.

Good to know: If you have little or no credit history, an insurer may get a "no hit" or "no score" result. That can happen to young drivers, people who mostly use cash, or someone whose accounts were all in a spouse's name. You may pay more than someone with good credit, though not necessarily the highest rate.

How much credit can affect your rate

The effect depends on your state, your insurer and the rest of your profile. Some analyses find the gap can be large. CNBC reported in 2026 that a NerdWallet analysis found drivers with poor credit pay 69% more on average than drivers with good credit.

Why do insurers use credit at all? A 2007 Federal Trade Commission study found that credit-based insurance scores effectively predict the number of claims consumers file and the total cost of those claims. The FTC also found that, on average, Black and Hispanic consumers tended to have lower scores. Consumer groups continue to argue that the practice is unfair, while insurers say it helps them price risk accurately. That debate is why some states have banned or limited it.

States that ban or restrict credit in auto insurance

Rules change, so treat this as a summary as of 2026 and check with your state insurance department for details.

States that ban it

  • California: Insurers don't use credit history or credit-based insurance scores to underwrite or rate auto policies.
  • Hawaii: State law bars auto insurers from basing rating plans on a person's credit rating.
  • Massachusetts: Auto insurers can't use credit information to set rates or to underwrite or renew policies.

States that restrict it

  • Michigan: Its auto insurance reform law bars insurers from using credit to set auto rates. Insurers also can't use credit to deny, cancel or refuse to renew an auto policy.
  • Maryland: Insurers may use credit when rating a new policy, but they can't use it to refuse coverage, cancel, refuse to renew or raise your premium at renewal. A credit-based surcharge can't exceed 40%, and you can ask your insurer to recheck your credit once per policy period.
  • Oregon: Insurers can't cancel or refuse to renew a policy because of your credit. They may consider certain credit information when you first apply.
  • Utah: Credit can be used when you first apply but can't be the only factor. After you've been a customer for 60 days, it can't be used to cancel or refuse to renew your policy.

Washington's insurance commissioner tried to ban credit-based pricing, but a court later struck down the rule, so credit scoring remains allowed there. As of 2026, bills to restrict credit-based pricing have been introduced in several other states, including Iowa, New York, Oklahoma and Pennsylvania. Check whether any have passed in your state.

In most other states, insurers can use credit, but according to the NAIC, they generally can't use it as the sole reason to raise rates or to deny, cancel or refuse to renew a policy.

Your rights when credit is used

Under the federal Fair Credit Reporting Act, an insurer that takes an "adverse action" based even partly on your credit report must notify you. The FTC says this includes denying coverage, charging a higher premium or making the terms of an existing policy less favorable. The notice must name the credit bureau that supplied the report and explain your right to a free copy if you ask within 60 days.

You can also check your reports from all three national credit bureaus for free once a week at AnnualCreditReport.com, the only site the FTC lists as authorized for these free reports. If you find an error, you can dispute it with the credit bureau, which generally must investigate.

Tip: If a major life event, such as a serious illness, divorce, a death in the family or a job loss, hurt your credit, ask your insurer whether it will make an exception. Some states require insurers to consider these situations.

How to improve your insurance score

There's no quick fix, but these habits may help your score and, over time, your rates:

  • Pay every bill on time. Payment history is a key factor.
  • Keep credit card balances low compared with your limits.
  • Apply for new credit only when you need it.
  • Fix errors. Ask the insurer to hold off on using disputed information until it's resolved.
  • Ask about re-scoring. Some insurers only check credit when you first apply. Ask whether yours will re-check if your credit improves.
  • Avoid paid "credit repair" services that promise to remove accurate information. You can dispute real errors yourself for free.

Shopping around when your credit isn't great

Insurers weigh credit differently, and some weigh it more than others. That means comparing quotes from several insurers can matter even more if your credit is fair or poor. Other steps, such as raising your deductible or asking about discounts, may also help. Our guide to lowering your car insurance premium has more ideas. If you find a better rate, follow our checklist on how to switch car insurance to avoid a gap.

Frequently asked questions

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

No. Both use your credit report, but an insurance score is designed to predict insurance claims, while a lending score predicts loan repayment. The factors may be weighted differently.

Does checking car insurance quotes hurt my credit?

Insurers typically use a soft inquiry for quotes, which doesn't affect your credit scores. See our guide on switching car insurance for more on shopping.

Which states don't allow credit in car insurance pricing?

As of 2026, California, Hawaii and Massachusetts ban it. Michigan, Maryland, Oregon and Utah restrict how it can be used. Rules can change, so check with your state insurance department.

Can an insurer raise my rate at renewal because my credit got worse?

It depends on your state and insurer. In Maryland, for example, a worse credit history can't be used to raise your renewal premium. In many other states, it may be allowed but generally can't be the only reason.

What should I do if I get an adverse action notice?

Request your free credit report from the bureau named in the notice within 60 days, check it for errors, and dispute anything that's wrong. You can also ask the insurer which factors affected your rate.

Sources

General information only. This guide explains general concepts and is not insurance, legal or financial advice. Rules and prices vary by state and insurer. Check your policy documents and speak to a licensed insurance professional or your state insurance department about your situation.