📊 The Hidden Rate Factor
Most people don't know: insurance companies use your credit history to set rates. Poor credit can more than double your premiums—even with a perfect driving record.
Excellent Credit
$1,800/yr
baseline rate
Fair Credit
$2,700/yr
+50% penalty
Poor Credit
$3,870/yr
+115% penalty
How Insurers Use Your Credit
Insurers don't use your regular credit score (FICO). They use a special "insurance score" that factors in:
Factors They Consider
- • Payment history
- • Outstanding debt
- • Length of credit history
- • New credit applications
- • Credit mix
Factors They Don't Consider
- • Your income
- • Employment history
- • Assets
- • Marital status
- • Race, religion, national origin
Why This Is Controversial
🎯 Punishes Life Circumstances
Medical debt, divorce, job loss—life events that hurt credit can spike your insurance rates, even if you're a safe driver.
📊 Correlation ≠ Causation
Insurers claim credit predicts claims, but critics say it's really just correlated with income and race, creating discriminatory outcomes.
💰 Double Penalty
People with financial troubles already pay more for credit cards and loans. Insurance makes their situation even worse.
States That Ban Credit-Based Insurance Pricing
In these states, insurers cannot use credit history to set auto or home insurance rates. If you live here, your credit doesn't affect your premiums.
Other states: Maryland, Oregon, and Utah have partial restrictions. Most other states allow credit-based pricing with some consumer protections.
How to Reduce Credit's Impact
📈 Improve Your Credit
Pay bills on time, reduce debt, don't close old accounts. Even small improvements can lower premiums.
🔍 Shop Multiple Insurers
Each insurer weighs credit differently. One may penalize you heavily; another may not.
📊 Check for Errors
Credit report errors are common. Dispute inaccuracies that might be hurting your insurance score.
💬 Ask About Exceptions
Some insurers offer "extraordinary life circumstance" exceptions for medical debt, divorce, etc.
The Bottom Line
Your credit history affects your insurance rates in most states—sometimes doubling your premiums. While the practice is legal in 46 states, you can fight back by improving your credit, shopping multiple insurers, and checking for errors. If you live in California, Hawaii, Massachusetts, or Michigan, credit can't legally affect your rates.