Credit-based insurance scores: how they affect car insurance and where states limit them

Yes, in most states your credit history can affect what you pay for car insurance. The NAIC says FICO estimates about 95 percent of auto insurers use credit-based insurance scores where the law allows, and NAIC's insurance research center lists eight states that bar using them to set rates or to issue or renew policies: California, Hawaii, Maryland, Massachusetts, Michigan, Nevada, Oregon and Utah.

Where scores are allowed, federal law gives you a notice when credit information costs you, a free copy of the report behind it, and the right to dispute errors. Some states add more. This guide sets out the mechanism, the limits and the steps.

Estimates and published averages, not a quote. Not insurance advice. State rules and insurer rules vary. Confirm requirements with your state insurance regulator or a licensed agent in your state.

An insurance score is not your credit score

A credit-based insurance score is built partly or entirely from information in your credit report, but it answers a different question. The NAIC describes it as a score used to estimate how likely someone is to file an insurance claim, not how likely they are to repay a loan. The inputs come from the same credit file, but the scoring model can weight them differently from a lending score, so the number a lender sees and the number an insurer uses are not interchangeable.

The NAIC says the scores were introduced in the early 1990s and are used mainly in two places: underwriting, which is whether to offer coverage and in which company or tier, and rating, which is the premium charged. Insurers use them alongside the other factors in the rating plan: claims history, driving record, location, the vehicle, coverage limits and deductibles. A score is one input among several, which is why two people with similar credit can get different quotes, and why fixing a credit error rarely changes a premium by itself.

Why insurers use them, and the objection

Insurers use credit-based scores because, in their data, the scores correlate with claims. The Federal Trade Commission studied this question for Congress, and its July 2007 report, Credit-Based Insurance Scores: Impacts on Consumers of Automobile Insurance, concluded that the scores are effective predictors of risk under automobile policies.

The same report recorded the objection that drives most state restrictions. It found that scores are distributed differently among racial and ethnic groups, a difference likely to affect the premiums those groups pay on average, while the scores appear to derive a relatively small amount of their predictive power from their correlation with race and ethnicity. The NAIC notes the continuing criticism that the scores may disproportionately affect minority and low-income consumers. That debate is why the rules differ so much from state to state, and why some legislatures have chosen to bar the practice outright.

Where states restrict or ban it

There is no single national rule. The NAIC's consumer page (last updated March 19, 2026) says that in most states insurers cannot use these scores as the sole reason to raise rates or to deny, cancel or refuse to renew a policy, that some states impose additional restrictions or prohibit certain uses entirely, and that many states require insurers to notify consumers when credit information played a role in an adverse decision. The table records what we could confirm from the NAIC and, for Texas, from the statute text.

Texas as a worked example of the rules

Texas allows credit scoring and writes detailed conditions into Chapter 559 of its Insurance Code, which makes it a useful model of what protections can look like. Section 559.051 allows an insurer to use credit scoring to develop rates, rating classifications or underwriting criteria, except for factors that constitute unfair discrimination. Section 559.052 then bars an insurer from denying, cancelling or nonrenewing a personal policy solely on the basis of credit information without considering another underwriting factor, and it controls how a missing credit file is treated: an insurer may not use the absence of credit information against you unless it has actuarial support, treats you as having neutral credit, or excludes credit and uses other criteria.

Disclosure comes first. Section 559.053 requires an insurer that uses credit to tell each applicant, at the time of application, that the credit report may be used in underwriting or rating, and to disclose on a commissioner-adopted form whether credit information on household members will be obtained and used.

Freshness rules follow. Under section 559.058, an insurer must use a report issued no more than 90 days before the policy is issued or renewed if it takes an adverse action based on it, must review and update an insured's credit report at least every 36 months, and must, on your request or your agent's at renewal, re-underwrite and re-rate based on a current report, not more than once in any 12-month period. That last rule is the practical lever: if your credit has improved since the insurer last pulled it, you can ask for a re-rate at renewal.

TDI's consumer guide summarizes the effect for drivers: insurers may use credit in pricing, but they may not deny coverage or charge more based only on a credit score.

The notice you are owed when credit costs you

Federal law treats a higher insurance price as an adverse action. The Fair Credit Reporting Act defines adverse action, for insurance, to include a denial or cancellation of, an increase in any charge for, or a reduction or other unfavorable change in the terms of coverage of any insurance (15 U.S.C. 1681a(k)(1)(B)(i)). When an insurer takes such an action based in whole or in part on a consumer report, section 1681m(a) requires it to notify you, to identify the consumer reporting agency that supplied the report with its name, address and phone number, to state that the agency did not make the decision and cannot explain it, and to tell you about your right to a free copy of the report within 60 days and to dispute its accuracy. If a numerical credit score was used, it must be disclosed as well.

Texas layers state requirements on top. Section 559.054 requires the notice within 30 days, requires the insurer to describe no more than four factors that were the primary influences, and says that a generic phrase such as poor credit history, poor credit rating or poor credit score is not sufficient notice. It must also tell you about your right to ask for a re-rate under section 559.058.

In practice, many drivers receive this notice as a letter with their quote or renewal and set it aside. Keep it. It names the bureau, starts your 60-day window for a free report, and lists the factors that drove the decision.

Check the data: getting your reports

You can see the credit reports that feed most insurance scores. The FTC's free credit reports page (dated June 2026) says the FCRA requires the three nationwide credit bureaus to give you a free copy of your report once every 12 months, ordered through AnnualCreditReport.com, by phone at 1-877-322-8228 or by mail, and that if a notice says an application for insurance was denied based on your credit report, you can get another free report if you ask within 60 days of the notice. The CFPB's summary of FCRA rights adds that you are also entitled to a free disclosure every 12 months on request from nationwide specialty consumer reporting agencies.

Insurers also read claims-history and driving-record reports that are separate from your credit file. Those are covered in your CLUE report and MVR. Checking both sets of reports before you shop avoids quoting on data you have not seen.

Disputing an error, and what a correction can change

If a credit report contains an error, dispute it with the bureau that holds it and, ideally, with the business that supplied the information. The FTC's dispute guidance (April 2024) says the bureau has 30 days to investigate, must give you the results in writing, and must give you a free copy of the report if the dispute changes it. The statute behind that, 15 U.S.C. 1681i, allows up to 15 more days if you send relevant information during the first 30, requires the bureau to notify the furnisher within five business days, and lets you add a brief statement of dispute if the investigation does not resolve it.

A corrected report helps only if the insurer re-rates on it. In Texas, section 559.055 requires the insurer to re-underwrite and re-rate within 30 days after it receives notice, from the bureau or from you, that a dispute found the information inaccurate, incomplete or unverifiable, and to make adjustments within 30 days after that. In other states, send the insurer the dispute result and ask in writing whether it will re-rate the policy and from what date.

A worked timeline with stated dates

Labelled illustration only, using the Texas rules and assumed dates. A driver's renewal is offered on June 1, 2026, with an adverse-action notice dated June 1 that names one bureau and lists a reported late payment as a primary factor. The driver believes the late payment belongs to someone else.

1. By July 31, 2026 (60 days after the notice): request the free report from the named bureau, as the FCRA allows.
2. August 3, 2026: file a dispute with the bureau, with documents showing the account is not the driver’s. The bureau’s 30-day investigation period runs to September 2, 2026, or up to 15 days longer if the driver adds relevant information during the first 30 days.
3. September 2, 2026: the bureau reports the item deleted and sends the result in writing. The driver forwards it to the insurer the same day.
4. By October 2, 2026 (30 days after the insurer receives notice): the insurer must re-underwrite and re-rate under Texas Insurance Code 559.055, with adjustments due within 30 days after that.
5. At the next renewal: the driver may ask for a re-rate on a current report, which the insurer must do on request no more than once in any 12-month period (559.058(b)).

Thin files, missing files and household members

Some drivers have little or no credit history: young drivers, recent arrivals, people who pay for everything in cash. Texas law addresses that case directly. Under section 559.052, an insurer may not use the absence of credit information, or an inability to determine it, as a factor in underwriting or rating unless it has statistical, actuarial or reasonable underwriting information showing the absence is related to loss experience, treats the consumer as having neutral credit information as the insurer defines it, or excludes credit and uses only other criteria. In plain terms, a Texas insurer that wants to treat a missing file as a negative has to be able to justify it.

Household members raise a second question. Texas section 559.053 requires the insurer to disclose, on a form adopted by the commissioner, whether credit information will be obtained on the applicant or insured or on any other member of the household and used in the scoring process. If you are applying for a household policy, read that disclosure to see whose credit is being used. Other states handle both questions in their own ways, so ask the insurer in writing how it treats a thin or missing file and whose credit it uses.

Questions to ask an insurer about credit

When you get a quote in a state that allows credit-based scoring, these questions turn a hidden factor into a visible one.

1. Did you use a credit-based insurance score in this quote, and which reporting agency supplied the report?
2. Was my credit used for placement in a company or tier, for the premium, or both?
3. Whose credit in my household was used?
4. How do you treat a thin or missing credit file?
5. If my credit improves, will you re-rate at renewal on request, and how often?
6. If a dispute corrects my report, from what date will you re-rate, and will you refund any difference?

What actually moves the score

Insurers and scoring companies do not publish their models in full, and we do not reproduce third-party lists of weights as fact. What can be said from the public record is narrower. The score is drawn from the credit file, so the file's accuracy is the first thing to check. The model weights credit information differently from lending scores, so a strong lending score does not guarantee a strong insurance score. And under Texas law, the insurer has to tell you the primary factors behind an adverse action, which is the most specific guidance you will get about your own score.

That makes the factor list in your adverse-action notice the starting point for any improvement plan. Read each factor, check it against your report, dispute what is wrong, and treat what is right as a reading of your file at that date. Improvements that come from time and on-time payments show up only when the insurer pulls a new report, which is why the re-rating rules above matter.

Things a credit-based score is not allowed to do

In the states that allow it, the common limits are worth knowing as a checklist. A score generally cannot be the only reason for a denial, cancellation or nonrenewal, per the NAIC's summary of most states. In Texas, it cannot be computed with factors that are unfair discrimination, it cannot be used against you because your file is thin or missing unless the statute's conditions are met, and an insurer cannot answer a request for reasons with a generic phrase. Texas rate law separately defines a rate as unfairly discriminatory if it is based wholly or partly on the race, creed, color, ethnicity or national origin of the policyholder (Insurance Code 2251.051(d)).

If you think an insurer has crossed one of those lines, the complaint goes to your state insurance department, in writing, with the notice and your report attached.

Where credit sits among the other rating factors

Credit is one factor in a rating plan that also weighs driving record, claims history, garaging location, the car, the drivers, limits and deductibles. For most drivers, the factors with the most effect are still the ones on the declarations page: limits, deductibles, discounts, and the accuracy of every rating fact. The ordered method is in how to lower car insurance, and the full list of factors is in why your car insurance is so high. The states that bar a driver’s sex or marital status as a rating factor are a different set from the credit states, and the state-by-state gender rating rules set out that text.

Credit also explains some renewal changes. Under Texas law an insurer updates the credit report at least every 36 months, so a renewal can move when a new report is pulled even if nothing else changed. If a renewal rose and you suspect credit, ask the insurer whether a new report was used, and read the increase line by line as in why your renewal went up.

Questions readers ask

Credit is one of three files insurers read. Pull the other two, your claims history and your driving record, and check them before your next quote.