An insurance score (also called a credit-based insurance score) is a number insurers use to help predict how likely you are to file a claim. It's built from the same credit report data as your FICO score — but it's calculated differently and used for a completely different purpose.
In most states, your insurance score is one of the most significant factors in determining your auto and homeowners insurance premiums — potentially more impactful than your claims history or even your driving record.
Why Insurers Use Insurance Scores
The use of credit data in insurance pricing is controversial, but insurers have extensive actuarial data supporting it: people with lower credit scores file insurance claims more frequently, and those claims tend to be larger.
The theory isn't that bad credit causes accidents — it's that the same financial behaviors and life circumstances that lead to credit problems also correlate with higher claim frequency. Whether you agree with this logic or not, it's legal in 45+ states and widely used.
How an Insurance Score Is Calculated
Insurance scoring models use factors from your credit report, but weighted differently than standard FICO models. The key factors:
Payment History (Most Important)
Your track record of paying bills on time. Late payments, collections, charge-offs, and bankruptcies have the greatest negative impact on your insurance score. Even one 30-day late payment can lower your score meaningfully.
Outstanding Debt / Credit Utilization
How much of your available credit you're using. High credit card balances relative to your limits (above 30%) negatively affect your insurance score. Paying down revolving debt is one of the fastest ways to improve both your credit and insurance scores.
Credit History Length
How long you've had credit accounts open. A longer established credit history signals stability. This is why closing old credit accounts (especially your oldest ones) can hurt your scores.
Types of Credit
A mix of credit types (mortgage, auto loan, credit cards, installment loans) tends to score better than one type only. Mortgage holders generally have higher insurance scores as a result.
New Credit Inquiries (Minor Factor)
Multiple hard credit inquiries from loan applications in a short period can slightly lower your score. However, insurance inquiries are soft pulls that never affect your score.
Insurance Score Ranges and Their Impact
Different insurers use different scoring models (LexisNexis, TransUnion, Verisk Analytics), but generally:
- Excellent (750–850): Best available rates — typically 20–30% below average
- Good (680–749): Slightly above-average rates
- Fair (620–679): Standard rates or slight surcharge
- Poor (550–619): 15–25% premium surcharge
- Very Poor (<550): 25–50%+ premium surcharge; some carriers may decline coverage
Real Dollar Impact
Here's what the difference looks like on a $1,500/year auto policy:
- Excellent credit score: ~$1,200/year
- Good credit score: ~$1,400/year
- Fair credit score: ~$1,700/year
- Poor credit score: ~$2,100/year
- Very poor credit score: ~$2,500–$3,000/year
The difference between excellent and very poor credit: potentially $1,300–$1,800/year on auto insurance alone. Over 10 years, that's $13,000–$18,000 in extra premiums.
How to Improve Your Insurance Score
Since insurance scores are derived from credit data, improving your credit improves your insurance score. The most impactful actions:
1. Pay All Bills On Time (Highest Impact)
Set up autopay for every recurring bill. Even one 30-day late payment can drop your score by 30–50 points and stay on your credit report for 7 years. Payment history is the single most important factor in both credit and insurance scoring.
2. Pay Down Credit Card Balances
Get your credit utilization below 30% — ideally below 10% for the best scores. If you have a $10,000 credit limit and carry $4,000 in balances (40% utilization), paying that down to $1,000 (10% utilization) can increase your score 50–80 points relatively quickly. This is the fastest way to improve your score.
3. Don't Close Old Credit Cards
Old accounts contribute to your credit history length and available credit limit (lowering utilization). Closing them hurts both. Keep old accounts open — even if you rarely use them.
4. Dispute Credit Report Errors
Studies show 20–30% of credit reports contain errors. An inaccurate negative item — a paid collection showing as unpaid, an account that isn't yours, a late payment that was actually on time — can be significantly lowering your score right now.
Get your free credit reports from annualcreditreport.com (all three bureaus) and dispute any inaccuracies with Equifax, Experian, and TransUnion directly.
5. Limit New Credit Applications
Each hard inquiry from a new loan application slightly lowers your score. Don't apply for new credit cards or loans before shopping for insurance — though remember insurance quotes themselves use soft inquiries and don't count.
6. Add Credit History If Thin
If you have limited credit history, consider:
- A secured credit card (backed by a deposit)
- A credit-builder loan from a credit union
- Being added as an authorized user on a family member's old account
Building credit takes time, but even 12–18 months of positive payment history can significantly improve your score from a thin-file baseline.
States Where Insurance Scoring Is Banned
If you live in these states, your credit score cannot be used to set insurance rates:
- California: Banned for auto insurance
- Massachusetts: Banned for auto and homeowners
- Michigan: Banned for auto insurance
- Hawaii: Banned for auto insurance
- Maryland: Restricted for auto insurance
In these states, other factors — driving record, location, vehicle type — carry more weight. In all other states, credit-based insurance scoring is legal and common.
Shopping With Different Carriers
Different insurers weigh insurance scores differently. Some carriers heavily weight credit; others place less emphasis on it. If your credit score is below average, shopping multiple carriers is especially valuable — you might find a carrier that weights other factors more favorably in their pricing model.
Our licensed insurance partner compares rates from 50+ carriers, which means you're seeing how different companies price your specific risk profile — including those that may be more favorable to your credit situation.
Bottom line: Your insurance score — derived from your credit report — can account for a 20–50% difference in what you pay for auto and home insurance. Improving it by paying bills on time and reducing credit card balances is one of the most high-leverage things you can do for your personal finances. In most states, even modest credit improvements translate directly into lower insurance premiums — saving hundreds of dollars per year.