Skip to main content

Credit - How Insurers Use It

  • Credit-Based Insurance Scores Aren't the Same as a Credit Score.

  • Understand How Credit and Other Factors Determine Your Premiums

  • In most states, insurers can use your credit-based insurance score to determine your premiums.

  • Your credit-based insurance score is not the same as your regular credit score. 

  • According to FICO, a data and analytics company that measures credit risks, many insurers use credit-based insurance scores in states where it is legally allowed.  

What You Need to Know

Know how an insurance company uses your credit-based insurance score.

An insurance company can only use your credit-based insurance score as one factor in its underwriting process. It will be considered with several other factors that vary by insurance type. 

For example, with auto insurance, other factors could be: your ZIP code; the age of the operators; the make, model and age of your car; and even the miles you drive annually. You can ask your insurance company if a credit-based insurance score was used to underwrite and rate your policy and which risk category you were placed in after you receive a quote. 

Know what's in a credit-based insurance score

There are several different companies that create credit-based insurance score reports for insurers to use. FICO looks at five general areas that it believes will best determine how you manage risk. This is the breakdown of what it considers and how much the information generally weighs in figuring your credit-based insurance score:  

  • Payment history (40%) — How well you have made payments on your outstanding debt in the past. 

  • Outstanding debt (30%) — How much debt you currently have. 

  • Credit history length (15%) — How long you have had a line of credit.  

  • Pursuit of new credit (10%) — If you have applied for new lines of credit recently.  

  • Credit mix (5%) — The types of credit you have (credit card, mortgage, auto loans, etc.). 

A credit-based insurance score cannot use any personal information to determine your score.

Information that is not in your credit report and cannot be used includes the following:  

  • Race, color, national origin 

  • Religion 

  • Gender 

  • Marital status 

  • Age 

  • Income, occupation or employment history 

  • Location of residence 

  • Any interest rate being charged 

  • Child/family support obligations or rental agreements 

  • Certain types of inquiries on your credit report like account review inquiries, employment inquiries, promotional inquiries from credit companies, etc. 


    Whether a consumer is participating in credit counseling of any kind  

Know how to check your credit report and how to get information about improving your credit-based insurance score.

The Fair and Accurate Credit Transaction Act of 2003 (FACT Act) allows consumers to obtain a free credit report once every 12 months from each of the three nationwide consumer credit reporting companies (Equifax, Experian and TransUnion). You can go to to check all three reports annually without paying a fee or being asked to buy other products. If you find errors on your credit report, contact the credit reporting company to have them corrected; errors could affect your credit-based insurance score. 

You can improve your credit-based insurance score.

  • Make payments on time. Pay bills, taxes and fines/fees as agreed. If you are behind on payments, catch up and stay current. Keep balances on credit cards as low as possible.

  • Many insurers will reconsider a change in premium if a policyholder experienced an extraordinary life circumstance like a catastrophic event, job loss or serious illness.  

5/7/2021 Update from NAIC

Insurance companies often use consumer credit information in determining if they will offer a consumer automobile or homeowners' insurance policy and how much that policy will cost. A credit-based insurance score is a rating based in whole or in part on a consumer's credit information. Credit-based insurance scores use certain elements of a person's credit history to predict how likely they are to have an insurance loss. Credit-based insurance scores were introduced by the Fair Isaac Corporation (FICO) in the early 1990s. FICO estimates approximately 95% of auto insurers and 85% of homeowners' insurers use credit-based insurance scores in states where it is a legally allowed underwriting or risk classification factor. 

Insurers use credit-based insurance scores primarily in underwriting and rating of consumers. Underwriting is the process by which the insurer determines whether a consumer is eligible for coverage and rating is the process that determines how much premium to charge a consumer. The credit-based insurance score models used by insurers are designed to predict the risk of loss. Insurers use credit-based insurance scores for underwriting to assign consumers to a pool based on risk and then for rating by deciding how to adjust the premium up or down.