Car insurance companies use your credit report by pulling it from one of the major bureaus and running the data through a scoring model built specifically for insurance, which produces a credit-based insurance score that helps set your premium. The number isn’t the credit score your lender sees, and the pull itself doesn’t hurt your credit. But the result can swing your annual bill by more than a thousand dollars, which is why it pays to know what insurers look at, what they’re not allowed to look at, and what to do when your credit is working against you.
Why Insurers Are Allowed to Pull Your Credit
The authority comes from the Fair Credit Reporting Act. Section 1681b of Title 15 authorizes a consumer reporting agency to furnish your report to anyone who “intends to use the information in connection with the underwriting of insurance involving the consumer.”1Office of the Law Revision Counsel. 15 USC 1681b – Permissible Purposes of Consumer Reports Insurance underwriting is a permissible purpose on its own, so your insurer doesn’t need fresh written consent each time it checks your file, whether you’re applying for a new quote or coming up for renewal.
The same statute puts obligations on the other side. Credit bureaus must keep your data accurate, and insurers must tell you when your credit led to a worse outcome. Those rules are where most of your leverage lives.
What Goes Into a Credit-Based Insurance Score
A credit-based insurance score draws from the same credit file a lender would see, but it weights the data to predict insurance claims rather than loan defaults. The main inputs:
- Payment history. Late payments, collections, and bankruptcies pull the score down. Consistent on-time payments pull it up. This is the heaviest factor.
- Credit utilization. How much of your available revolving credit you’re actually using. Balances close to your limits signal financial stress.
- Length of credit history. The age of your oldest account and the average age across all accounts both matter.
- Credit mix. Managing different types of accounts, such as an installment loan alongside a credit card, generally helps.
- Recent activity. A burst of new accounts opened in a short window can lower the score.
What Insurance Scores Leave Out
Your income, employment status, occupation, race, religion, and marital status are not part of the calculation. Credit-based insurance scores are built strictly from credit file data. Medical collection accounts can still appear on your report and feed into the score; a 2024 Consumer Financial Protection Bureau rule that would have removed medical bills from credit reports was struck down by a federal court in July 2025.2Consumer Financial Protection Bureau. CFPB Finalizes Rule to Remove Medical Bills from Credit Reports The debt balance remains visible, though the specific provider and nature of the services do not.
An Insurance Credit Check Doesn’t Hurt Your Score
When an insurer pulls your credit, it registers as a soft inquiry. Soft inquiries have no effect on your credit score, and other lenders reviewing your file won’t see the insurance pull at all.3Consumer Financial Protection Bureau. What Is a Credit Inquiry You can see it on your own report, but it’s informational only.
So shop around. Five quotes in a week leaves your score exactly where it was.
How Much Credit Changes Your Premium
The gap between drivers with strong and weak credit is wide. Industry research shows that drivers with poor credit (scores below 580) pay roughly 109% more per year than drivers with exceptional credit (800 or higher), even when their driving records are identical. On average that’s about $1,400 more per year. In some states the surcharge approaches 200%; in others it stays closer to 60%.
Movement in the other direction helps too. Climbing one credit tier can shave roughly $350 off an annual auto premium, and jumps from the poor tier to the average tier often produce larger drops. If you’ve paid down balances or cleared a collection account, call your insurer at renewal and ask whether your improved credit has been re-scored into the rate.
States Where Credit Can’t Be Used
Four states prohibit insurers from using credit scores or credit history to set auto insurance rates: California, Hawaii, Massachusetts, and Michigan.4Michigan Legislature. Michigan Code 500.2162 – Use of Credit Score to Establish Rates or Rating Classification for Automobile Insurance Prohibition In those states, insurers rely on driving record, mileage, vehicle type, and claims history instead.
Several other states restrict credit use without banning it. Maryland lets insurers consider credit when initially pricing a new policy but prohibits them from raising renewal premiums if credit later deteriorates. If your credit improves, Maryland insurers must re-pull the score at least every two years and pass through any improvement, and you can request one additional re-check during a policy period. Rules vary widely elsewhere, so your state insurance department is the right place to confirm what applies where you live.
The Adverse Action Notice Is Your Best Lever
If an insurer charges you more, denies your application, or cancels your coverage based even partly on your credit report, that counts as an “adverse action” under federal law. You’re entitled to a written notice that includes:5Office of the Law Revision Counsel. 15 USC 1681m – Requirements on Users of Consumer Reports
- The name, address, and phone number of the credit bureau that supplied the report.
- The numerical credit score or insurance score the insurer relied on.
- A statement that the credit bureau didn’t make the decision and can’t explain it.
- Notice of your right to dispute inaccurate information and your right to a free copy of your report within 60 days of the notice.6Office of the Law Revision Counsel. 15 USC 1681j – Charges for Certain Disclosures
Don’t throw the notice away. The 60-day free report window is your chance to pull the file, look for errors, and dispute anything that shouldn’t be there.
Disputing Errors on the Report
If you find incorrect information, you can dispute it at no cost. Both the credit bureau and the company that originally furnished the data must investigate and correct inaccuracies.7Federal Trade Commission. Disputing Errors on Your Credit Reports Contact both the bureau and the data furnisher in writing, include documents that support your position, such as account statements or payment confirmations, and keep copies of everything you send. Each bureau has its own dispute process and address, listed on your report or the bureau’s site. Once the record is corrected, go back to your insurer and ask for your premium to be re-evaluated against the fixed file.
The Extraordinary Life Circumstances Exception
Most states that permit credit-based insurance scoring have adopted a provision, modeled on National Council of Insurance Legislators language, that lets you ask for a rate exception when a major life event, rather than routine financial mismanagement, caused the credit damage. Qualifying events typically include:
- Serious illness or injury to you or an immediate family member
- Death of a spouse, child, or parent
- Divorce or involuntary loss of alimony or support payments
- Identity theft
- Involuntary job loss lasting three months or more
- Military deployment overseas
- A government-declared catastrophe affecting your area
The request has to be in writing, with documentation tying the event to the credit damage. Insurers are required to tell you this exception exists in the adverse action notice itself, but the information often sits buried near the end of the letter. If any of these describe your recent history, filing the request is one of the fastest ways to bring a premium down without waiting for your credit to rebuild on its own.