Some states are trying to phase out the use of credit-based insurance scores
California
, Hawaii, and Massachusetts
are the only states where insurers can’t use credit information at all in underwriting—but lawmakers in a handful of other states are toying with the idea of following their example. Some recent efforts to reform the use of credit in auto insurance include:
Nevada Regulation R087-20
: Adopted in 2020 in response to the COVID-19 pandemic, this regulation temporarily prevents insurers from raising policyholders’ rates based on changes to their credit report. The bill will be in force until May 20, 2024. Maryland
: In 2022, two Maryland legislators proposed bills to outlaw the use of credit in auto insurance underwriting, but neither bill passed.
In addition to these state-level bills, a group of Congresspeople have recently proposed H.R. 3693
, a bill which would prohibit insurance companies from calculating rates based on credit as well as: The Prohibit Auto Insurance Discrimination (PAID) act is still under review in Congress.
FAQs
What is a credit-based insurance score?
The credit-based insurance score that insurance companies use to set the price of your insurance policy is based on the same basic information as your scores from major credit bureaus: your history of credit payments, current debt level, length of credit history, credit mix, and pursuit of new credit. However, credit-based insurance scores put more weight on your payment history than your regular score.
What is a good credit score for insurance?
The best credit scores for car and homeowners insurance are above 750. If your score is 740 or below, you’re likely to see higher insurance quotes, and drivers with credit under 550 may struggle to find affordable insurance.
Why do insurance companies go by your credit score?
Insurance companies defend the use of credit reports in insurance underwriting because previous research has demonstrated a correlation between low credit scores and insurance losses. Drivers with poor credit are more likely to file claims and cost insurance companies money, making credit a reliable risk factor.
Can you be turned down for insurance because of your credit score?
Yes. In states where it’s legal to use credit scores in setting rates, it’s typically legal for insurers to turn down an applicant entirely because of their credit score.
What states don’t use credit for insurance?
As of 2023, California, Hawaii, and Massachusetts are the only states that prohibit the use of credit scores in setting car insurance rates.