“Understanding Insurance Regulations: States That Don’t Use Credit Scores”

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States That Do Not Use Credit Scores for Insurance

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

Which States Use Credit Scores for Insurance?

Most states allow the use of credit scores for insurance purposes, but the eight states listed above have restrictions or bans on this practice.

What Is a Credit-Based Insurance Score?

A credit-based insurance score is a score derived from your credit report, used by insurers to predict the likelihood of you filing a claim.

How Can I Lower My Insurance Rates if I Have Poor Credit?

Improving your credit can help lower your insurance rates. Paying bills on time and keeping credit card balances low can positively impact your credit-based insurance score.

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.

For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We are here to assist you with the best mortgage solutions tailored to your needs.

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