In 2025, your credit score continues to play a significant role in determining your insurance premiums in many U.S. states. Insurers use a credit-based insurance score to assess how likely you are to file a claim, impacting what you pay for car, home, and even renters insurance. Here’s a breakdown of how and why your credit score influences your premium.

What is a Credit-Based Insurance Score?

A credit-based insurance score is derived from elements of your credit report, including payment history, credit utilization, length of credit history, and types of credit used. Unlike regular credit scores used for loans, this score is tailored to predict insurance risk.

Why Do Insurers Use Credit Scores?

Studies show a correlation between credit behavior and the likelihood of filing insurance claims. Insurers believe individuals with better credit are more responsible and pose less financial risk, thus qualifying for lower premiums.

How Your Credit Score Affects Your Premium

• Excellent Credit: Typically results in the lowest insurance rates.
• Average Credit: Leads to moderate rates—higher than excellent but still manageable.
• Poor Credit: Can result in significantly higher premiums, sometimes double or more compared to excellent credit.

States That Limit or Ban Credit Score Usage

Some states have restricted or banned the use of credit scores in insurance pricing to ensure fairness. As of 2025, California, Massachusetts, Michigan, and Hawaii have limitations in place.

How to Improve Your Score to Lower Premiums

• Pay your bills on time
• Reduce credit card balances
• Avoid opening unnecessary new credit lines
• Regularly check your credit report for errors

Conclusion

Your credit score is more than just a borrowing tool—it directly impacts your insurance costs. By maintaining good credit habits, you can access better insurance rates and potentially save hundreds of dollars annually.