Which States Restrict the Use of Credit Scores in Determining Insurance Rates?

Quick Answer

Credit-based insurance scores help insurance companies better understand their risk when approving a policy, but it’s not allowed everywhere. The eight states that have strict limitations on the use of credit with auto or homeowners policies are California, Hawaii, Maryland, Massachusetts, Michigan, Nevada, Oregon and Utah.

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In most states, insurance companies can use credit-based insurance scores when making decisions about whom to insure and how much to charge. These scores are based on your credit report and are designed to predict how likely you are to file a claim that will lead to a loss for the insurer.
However, eight states forbid home and auto insurance companies from using credit-based insurance scores when offering or renewing a policy, or deciding how much to charge in premiums. Let's go over those eight states and how they regulate the effect credit can have on your insurance policies.

1. California

Insurance companies in California don't use credit-based scores or your credit history for underwriting or rating auto policies, or setting rates for homeowners insurance. As a result, your credit won't impact your ability to get or renew a policy, or how much you pay in premiums.

2. Hawaii

Hawaii bans auto insurers from using credit ratings when setting standards, including underwriting standards and rating plans, which determine your premiums. Your credit can, however, impact your homeowners insurance.

3. Maryland

In Maryland, homeowners insurance companies can't refuse you coverage, cancel a policy, refuse to renew your policy or base your insurance rates on your credit history—or lack thereof. Auto insurers can use your credit history to help determine your rate on a new policy, but can't use it to deny your initial application, cancel a policy, refuse to renew your policy or increase your premiums during a renewal.

4. Massachusetts

Massachusetts law forbids auto insurance companies from using credit information or credit-based insurance scores when setting rates, underwriting a new policy or renewing an auto policy. Homeowners insurance rates also can't be based on your credit.

5. Michigan

Insurance companies in Michigan can't use your credit or a credit-based insurance score as part of their decision-making process to deny, cancel or refuse to renew an auto or homeowners policy. Additionally, auto insurers can't use your credit score to determine your rates. However, insurance companies might be able to consider your credit when deciding which installment payment options to offer for your policy.

6. Nevada

Nevada temporarily limited how insurance companies can use credit-based insurance scores during the pandemic. Through May 20, 2024, insurance companies in the state can't consider negative credit information from events that happened after March 1, 2020, to deny, cancel, refuse to renew a policy or to increase premiums on an existing policy. However, they can still lower your premiums if you improved your credit. Unless the law becomes permanent, the limitation on credit-based insurance scores ends on May 20, 2024.

7. Oregon

In Oregon, insurance companies can't cancel or refuse to renew an insurance policy because of your credit, but they can consider your credit as a factor when deciding whether to initially offer you a policy. However, even then, they're limited to considering certain information from your credit report to underwrite and rate your policy.

8. Utah

In Utah, insurance companies can use your credit information when initially underwriting an auto policy, but it can't be the only factor used to make the decision. Once you've been a customer for 60 days, the company can't use your credit information to cancel or refuse to renew your policy, or decline coverage for a new vehicle that you or select household members own.

Auto insurance companies can also only use credit information to offer you a discount on your premiums, not charge you more. And, once in place, they can't remove the discount based solely on a change in your credit.

Frequently Asked Questions

  • Most states allow insurance companies to use credit-based insurance scores to help them make decisions about whom to insure and how much to charge. However, state insurance regulators still generally don't allow insurance companies to use a credit-based insurance score as the sole reason for a decision.

    Factors other than your credit history, such as your claims history and the vehicle or home you're insuring, may have a larger impact on your eligibility and premiums. Additionally, even the states that limit the use of credit scores for auto or home insurance might not have laws restricting their use for life insurance.

  • Credit-based insurance scores are a tool that insurance companies can use to assess consumers. Similar to credit scores for lending purposes, these scores are largely based on the information from your credit report. However, instead of predicting the likelihood that someone will miss a bill payment, they're designed to predict the likelihood that someone will file claims that lead to a monetary loss for the insurer.

  • Regardless of your credit, you may be able to lower your insurance premiums by choosing a policy with a higher deductible or lower coverage amounts. Many insurance companies also offer various discounts, such as lower premiums if you bundle multiple policies. Comparison shopping can also often be a good idea, and you may want to regularly get new quotes to see if you can save money by switching providers.

Improving Your Credit May Help Lower Your Premiums

If you live in a state that allows insurance companies to consider your credit standing, improving your credit can help you lower your rates. By and large, credit-based insurance scores are based on similar factors that influence your credit scores, which means doing things like paying bills on time and keeping credit card balances low can help you improve both types of scores.

You can monitor your credit with Experian to keep an eye on your credit report. Experian members can also quickly gather and compare auto insurance quotes to see if they can save money while keeping the same amount of coverage.