We are often asked whether credit affects home and auto insurance rates. The short answer is that in most states, including Florida, it can. Many people are surprised to learn this, so here is how it works and what you can do about it.
What Is a Credit-Based Insurance Score?
Insurers do not use your credit score in the same way a lender does. Instead, many use a credit-based insurance score, which draws on information in your credit report to predict the likelihood of future insurance claims. Industry studies have found a correlation between how people manage credit and how often they file claims, which is why many insurers use these scores as one factor in pricing.
Credit-based insurance scores generally consider factors such as:
- Payment history and late payments
- Outstanding debt and credit utilization
- Length of credit history
- Recent applications for new credit
- Types of credit in use
They do not consider income, race, religion, gender, marital status, or where you live.
Does Checking My Credit for Insurance Hurt My Score?
No. When an insurer reviews your credit for a quote, it is a soft inquiry. It does not affect your credit score and is not visible to lenders.
State Rules Vary
States regulate how insurers can use credit. California, Hawaii, and Massachusetts prohibit using credit to set auto insurance rates, and some states, such as Maryland, restrict its use in homeowners insurance. Florida allows insurers to use credit-based insurance scores with consumer protections: insurers cannot deny, cancel, or nonrenew a policy based solely on credit, must notify you if credit information results in less favorable terms, and must consider requests for exceptions when your credit has been affected by extraordinary life circumstances, such as serious illness, the death of a family member, divorce, or job loss.
How Much Does Credit Matter?
Credit is only one of many rating factors. For auto insurance, your driving record, vehicles, drivers, and where the car is garaged usually matter more. For homeowners insurance, the age and construction of the home, roof condition, location, and claims history are major factors. The weight given to credit varies by insurance company, which is one reason quotes can differ significantly between carriers.
How to Improve Your Credit-Based Insurance Score
- Pay bills on time, every time.
- Keep credit card balances low relative to their limits.
- Avoid opening many new accounts in a short period.
- Check your credit reports for errors at AnnualCreditReport.com and dispute inaccuracies.
Improvements take time to show up, but they can lead to better rates at future renewals.
How an Independent Agent Helps
Because each insurer weighs credit differently, comparing multiple carriers can make a real difference. At Eton Bridge, we shop your home and auto coverage with several insurance companies to find the best combination of coverage and price. Request a personal insurance quote to see your options.
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