# Credit-Based Insurance Scores Explained
Many people are surprised to learn that, in most states, your credit history can influence what you pay for auto and home insurance. It's not the same as the credit score a lender uses, and it doesn't work the way most people assume. This guide explains what a credit-based insurance score is, why carriers use it, how the rules differ by state, and what you can do about it — for policyholders across our seven-state footprint.
What a Credit-Based Insurance Score Is
A credit-based insurance score is a number derived from information in your credit report that carriers use, where permitted, to help predict the likelihood of future claims. It is *not* your lending FICO score, and it isn't a judgment about your character or ability to repay a loan. It's a statistical tool built specifically for insurance rating.
Insurers adopted it because, across large populations, credit-based scores correlate with claim frequency. People with stronger scores, on average, file fewer and smaller claims — so carriers use the score as one factor among many to price risk.
What Goes Into It
A credit-based insurance score generally weighs factors similar to a credit score, though not identically:
- Payment history — a record of paying on time helps.
- Outstanding debt — how much of your available credit you're using.
- Length of credit history — longer, well-managed history helps.
- Pursuit of new credit — many recent applications can hurt.
- Types of credit in use.
Notably, it generally does not consider income, ethnicity, religion, or address in the way people fear — regulators prohibit unfairly discriminatory rating. It's built from credit-report data only.
It's One Factor, Not the Whole Price
A credit-based insurance score is only *one* input. Your driving record, the vehicle or home, your claims history, coverage choices, and location all matter too — often more. A great score won't rescue a stack of at-fault accidents, and a weaker score can be offset by a clean record and smart coverage choices.
The Rules Vary by State
This is the most important thing to understand: the use of credit in insurance is regulated at the state level, and the rules differ. Some states restrict or prohibit its use for certain lines; others allow it with limits. Regulators generally require that:
- Credit can't be the sole reason to deny, cancel, or non-renew.
- Carriers must consider extraordinary life events (like a serious illness or job loss) that damaged your credit.
- Consumers get notice (an "adverse action" notice) if credit caused a higher rate.
Each state's Department of Insurance sets and enforces these rules, so what applies in Missouri may differ from Kansas, Nebraska, Tennessee, Oklahoma, Arkansas, or Colorado. Ask us how it works for your specific policy and state.
Your Rights
Because the score is built from a consumer report, you're protected under the Fair Credit Reporting Act (FCRA):
- If credit caused a higher rate, you're entitled to an adverse action notice explaining the main factors.
- You can request your credit report and dispute errors that may be dragging your score down.
- You can ask your carrier to re-rate you after correcting errors or after a qualifying life event.
The Consumer Financial Protection Bureau and Federal Trade Commission oversee these consumer-report protections.
What You Can Do
- Pay on time, every time — the single biggest lever.
- Keep balances low relative to your limits.
- Avoid opening lots of new accounts right before shopping for insurance.
- Check your credit report for errors and dispute them.
- Tell us about a life event — many carriers must consider extraordinary circumstances.
- Let us re-shop you. Carriers weight credit differently; one may penalize a thin file while another barely uses it.
How BNW Helps
Because we're independent, we're not stuck with one company's view of your credit. If a credit-based score is inflating your rate at one carrier, we can present your profile to others across our roster and find the one that treats it most fairly. Call or text Lucy, our AI receptionist, at (573) 594-5148, or start a quote at insuretoday24.com.
References
1. National Association of Insurance Commissioners — https://www.naic.org
2. Consumer Financial Protection Bureau — https://www.consumerfinance.gov
3. Federal Trade Commission — https://www.ftc.gov
4. Insurance Information Institute — https://www.iii.org
5. Investopedia: Credit-Based Insurance Score — https://www.investopedia.com/terms/c/credit-based-insurance-score.asp
Related
- What Affects Your Insurance Rate: The Factors Underwriters Weigh
- What Is Underwriting in Insurance?
- What Is a CLUE Report and How Claims History Follows You
- How Insurance Premiums Are Calculated
- Your Rights as an Insurance Policyholder
Watch
- How credit affects your insurance rate — Investopedia (youtube.com/@Investopedia); search: "credit based insurance score how credit affects insurance explained"
- Why insurers check your credit — NerdWallet (youtube.com/@NerdWallet); search: "does credit score affect car insurance rate explained"