The credit score your insurer uses isn't your FICO
Your credit score is an important metric that lenders and credit cards use to determine if you qualify for financing. While that score isn’t important to your car insurance company, they likely use the same underlying credit data to calculate another number that can significantly impact what you pay for coverage: your credit-based insurance score.
TheZebra.com looks at how this score affects premiums, the differences between a FICO score and a credit-based insurance score, why many states are moving to ban the insurance industry from using credit-based scores, and what you can do to improve these numbers and pay less.
What Is a Credit-Based Insurance Score?
Your three-digit credit score, which ranges from 300 to 850, is used to predict whether you’ll be late or delinquent on payments. This score is calculated by third-party scoring providers, such as FICO (the Fair Isaac Corporation), using algorithms that gather data from reports by the three credit bureaus (TransUnion, Equifax, Experian). The higher your score, the more likely you are to be approved for financing.
But when it comes to car insurance, the score that really matters is your credit-based insurance score (CBIS), a different three-digit rating tool that carriers can use to help predict the likelihood that you’ll file an insurance claim as well as the potential cost of those claims. Insurers calculate your CBIS based on information found in your credit reports and credit history.
“A CBIS isn’t the same as a FICO score, but it draws on many of the same factors: payment history, outstanding debt, length of credit history, new credit inquiries, and credit mix,” explains Beth Swanson, insurance analyst with The Zebra. “It might be surprising, but there’s a correlation between lower credit scores and higher claims risk. Because of that, most states allow insurers to factor your score into underwriting and pricing, and it’s one of several factors (like your driving record, ZIP code, or claims history) that shape your final premium.”
FICO reports that 95% of auto insurers use credit-based insurance scores when determining an applicant’s risk in states that permit the use of these scores.
Your CBIS Vs. Credit Score
Certified financial planner Taylor Kovar notes that your CBIS isn’t the same number you’ll see in your banking app. Both scores use information from your credit report, but the categories of information are weighted differently in determining the score.
“However, both scores can move in a similar direction,” he says. “In my experience, a lot of people don’t realize that an insurance score is part of the policy pricing until a renewal changes, and they’re trying to figure out why.”
Here’s a handy table that breaks down how each type of score is weighted:
The Science Behind the Score
So why does your credit history matter for your car insurance? Research shows that how a person handles their finances can predict their likelihood of filing insurance claims. Drivers with lower credit-based insurance scores tend to file more claims, and those claims tend to cost more. Insurers aren’t suggesting that bad credit actually makes you a worse driver (even though it can feel like that).
They're working from patterns in large data sets that show a consistent relationship between credit behavior and claim frequency. Think of it less as a judgment and more as a numbers game: across millions of policyholders, certain financial patterns tend to show up alongside higher claim rates, and insurers price accordingly.
How Much Can Your Insurance Score Actually Affect Your Rate?
The financial impact varies by state and carrier, but the difference between excellent and poor credit can be significant. As Janet Ruiz of the Insurance Information Institute puts it: "A driver with an otherwise identical risk profile but a poor insurance score could pay several hundred dollars more each year."
Why States Are Starting to Push Back
Currently, California, Hawai‘i, Massachusetts, and Michigan prohibit or significantly restrict the use of CBIS information when pricing auto insurance. Maryland, Utah, and Oregon have certain limitations or restrictions on how credit can be used. Legislation has been introduced recently in other states that either ban or limit the use of non-driving factors to calculate insurance rates, like credit score. For example, West Virginia recently introduced a bill to ban credit scores across all personal lines of insurance, while Rhode Island introduced a bill to prohibit considering credit history in auto insurance rates before holding the bill for further study.
“Iowa had a bill introduced in early 2026, but it died in committee in May. New York, Oklahoma, and Pennsylvania all have active bills right now,” Swanson adds. “This demonstrates that, as affordability continues to be a concern for people, states are showing more interest in limiting some of those non-driving factors that have traditionally been part of underwriting.”
CBIS supporters argue that these insurance scores have a statistical relationship with claim frequency and allow insurers to price risk more accurately.
“They also believe that removing this factor could increase premiums for policyholders whose credit currently qualifies them for lower rates,” says Dennis Shirshikov, a professor of finance and economics at City University of New York/Queens College. “But critics argue that credit has nothing to do with driving ability, can penalize people following a medical emergency or job loss, and can disproportionately affect lower-income communities.”
How Insurance Scores Are Regulated
The way banks use your credit score is regulated at the federal level. But insurance companies' use of your insurance score is regulated at the state level. That means some states restrict the use of insurance scores in policy pricing, some allow broad use, and some ban it entirely. Each state determines what information from your credit report can be used, including:
- Your total available credit
- Items that you've disputed and are under review
- How many hard credit inquiries have been made recently (such as when you're applying for a new credit card or loan, not when you're checking your credit report)
- Debt from hospitals or other medical providers
- Your credit mix
What's Next for Credit Score Bans?
The momentum isn't slowing down. As car insurance costs remain a top concern for drivers across the country, more states are likely to take up this issue in 2027. If you live in a state that still allows credit-based insurance scoring, the rules could change in the coming years. The easiest way to stay in the loop is to look at your state's department of insurance website. In the meantime, improving your credit is one of the best things you can do for your insurance rate if your state still allows it as a factor. If your credit has gotten better recently, it might be a great time to get new quotes and avoid paying more than you need to.
What You Can Actually Do About It
To improve your CBIS and, ideally, pay less for car insurance, here’s what the experts recommend:
- Dispute errors with your score. Under the Fair Credit Reporting Act, you can dispute inaccurate information with Equifax, Experian, and TransUnion for free. "Errors can be challenged with each credit bureau online or by mail, and after the bureau corrects its report, ask your carrier to re-rate your policy using the updated information," says Ruiz. If you've received an adverse action notice, request a free consumer disclosure report from LexisNexis to see exactly what data was used in your score calculation.
- Manage debt responsibly. Pay your bills on time and in full whenever possible, and avoid maxing out your credit cards or using too much of your total spending limit.
- Ask about your insurance score. “These scores are not always made available to consumers in the same way as ordinary credit scores. But you can ask your insurer or agent whether a score was used and request the score, the primary reason for the score, or any adverse action notice associated with their pricing decision,” advises Shirshikov.
- Shop around with different insurers. “A different company can weigh your credit differently, and in many cases strategies like bundling policies, adjusting deductibles, or completing a safe driving program can also reduce your rate,” Kovar says.
FAQs
How Can I Find My Credit-Based Insurance Score?
Unlike traditional credit scores, credit-based insurance scores are usually not available directly to consumers. But you can ask your carrier whether credit-based insurance information is being used and request an explanation if it affects your premium.
Can I Dispute My Insurance Score?
You probably cannot dispute an insurer’s proprietary scoring formula. However, you can dispute inaccurate information found in your three credit reports, which could be feeding that formula. Errors can be challenged with Equifax, Experian, or TransUnion online or by mail. After each credit bureau corrects its report, ask your carrier to re-rate your policy using the updated information. Contact your state insurance department if you believe your insurer used credit information in a way that violates state law.
How Much Can Having Bad Credit Raise My Car Insurance Rate?
Poor credit could increase your auto insurance rate by hundreds of dollars, in some cases, compared to a similar driver with excellent credit. The impact varies by state, carrier, and credit tier.
This story was produced by TheZebra.com and reviewed and distributed by Stacker.
