How it works
Scoring models look at broad areas of your credit report: payment history, outstanding debt, length of credit history, new credit applications and the mix of credit you use. They cannot use personal details such as race, religion, gender, marital status, age, income, occupation or where you live.
States regulate the practice. Hawaii, Massachusetts and California prohibit using credit history in auto insurance. Many other states set limits, such as barring credit as the only basis for a decision or requiring a notice when credit led to a higher price or a refusal.
If your credit was hurt by an extraordinary life event, such as a serious illness, a job loss or a catastrophe, many insurers will reconsider your premium if you ask. Checking your credit reports for errors before you shop can also help.
Related terms
Sources
- NAIC, Credit-Based Insurance Scores definition and state limits on use
- NAIC, Credit-based insurance scores aren't the same as a credit score score components, excluded information, extraordinary life circumstances
- NAIC, Use of Insurance Credit Scores in Underwriting (government affairs brief) as of July 1, 2019
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