The Connection Between Your Credit Score and Insurance Premiums
If you have ever wondered why an insurance agent asks for your Social Security number or permission to run a credit check, you aren’t alone. It can feel invasive and, frankly, a bit confusing. After all, what does your ability to pay off a credit card have to do with your ability to navigate a four-way stop?
The reality is that in most of the United States, your credit history is one of the most influential factors in determining how much you pay for auto and homeowners insurance. While it may seem like an odd metric for measuring driving or property risk, insurance companies rely heavily on a specialized version of your credit data known as a credit-based insurance score.
What is a Credit-Based Insurance Score?
It is important to distinguish between the FICO score a lender uses and the insurance score a carrier uses. While they both pull from the same credit reports (Equifax, Experian, and TransUnion), they weigh the data differently. A lender wants to know if you will pay back a loan; an insurer wants to know how likely you are to file a claim.
According to the National Association of Insurance Commissioners (NAIC), these scores typically focus on:
- Payment History (40%): Do you pay your bills on time?
- Outstanding Debt (30%): How much of your available credit are you currently using?
- Length of Credit History (15%): How long have you been managing credit accounts?
- New Credit (10%): Have you applied for several new loans or cards recently?
The Statistical Link: Risk vs. Responsibility
Insurance is a game of probabilities. Actuaries have spent decades analyzing data, and their research consistently shows a strong correlation between credit health and insurance risk. Statistical studies, including those by the Federal Trade Commission (FTC), suggest that individuals with lower Oregon credit scores are statistically more likely to file claims and, on average, those claims tend to be more expensive.
From an insurer’s perspective, a high credit score often reflects a high level of “risk aversion.” Conversely, a lower score—which may be caused by high debt or late payments—is viewed as a marker of potential financial instability, which the industry correlates with a higher likelihood of seeking reimbursement for small accidents or property damage rather than paying out of pocket.
How Much More Will You Pay?
The financial impact is not marginal; it is substantial. In 2026, industry data shows that drivers with “poor” credit can pay nearly twice as much (a 98% to 105% increase) for the exact same coverage as someone with “excellent” credit. In Missouri, for example, the average annual premium for a driver with poor credit is approximately $4,682, compared to just $2,040 for someone with excellent credit. That is a difference of over $2,600 per year based on a three-digit score alone.
Exceptions to the Rule
Not every driver is subject to these rules. Because the practice is controversial, several states have banned or limited the use of credit scores in insurance pricing. As of 2026, California, Hawaii, Massachusetts, and Michigan prohibit insurers from using credit as a factor for auto insurance. Other states, like Maryland, prohibit its use for homeowners’ insurance.
In Missouri, there has been active legislative action (such as Senate Bill 852) aimed at prohibiting the practice, though, as of now, it remains a primary rating factor for most local carriers.
What You Can Do
The good news is that, unlike your age or location, your credit score is something you can control.
- Check for Errors: Roughly 20% of credit reports contain mistakes that can drag your score down.
- Lower Utilization: Aim to keep your credit card balances below 30% of your limits.
- Consistency: Even one late payment can cause a significant dip in your insurance score.
By improving your credit health, you aren’t just making it easier to buy a car or a home—you are actively lowering the “tax” you pay on your insurance every single month.
Get an insurance quote today by calling us at at (541) 318-8835 or click here to connect with us online.
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