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States That Restrict Credit-Based Insurance Scores

In most states, insurance companies can use credit-based insurance scores to decide whom to insure and how much to charge. These scores are based on your credit report and predict the likelihood of filing a claim that could lead to a loss for the insurer. However, eight states have regulations that prevent home and auto insurance companies from using credit-based insurance scores when offering or renewing a policy or deciding on premiums. Let’s explore these states and their regulations.

1. California

In California, insurance companies do not use credit-based scores or your credit history for underwriting or rating auto policies or setting rates for homeowners insurance. This means 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. However, your credit can impact your homeowners insurance.

3. Maryland

In Maryland, homeowners insurance companies cannot refuse you coverage, cancel a policy, refuse to renew your policy, or base your insurance rates on your credit history. Auto insurers can use your credit history to help determine your rate on a new policy but cannot 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 cannot be based on your credit.

5. Michigan

Insurance companies in Michigan cannot 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 cannot use your credit score to determine your rates. However, insurance companies might 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 cannot consider negative credit information from events that happened after March 1, 2020, to deny, cancel, refuse to renew a policy, or 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 cannot 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 are 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 cannot be the only factor used to make the decision. Once you’ve been a customer for 60 days, the company cannot 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 cannot remove the discount based solely on a change in your credit.

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. 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.

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

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