Your credit score, specifically a "credit-based insurance score," significantly impacts auto and homeowners insurance premiums and eligibility. Insurers use this data to predict risk, with lower scores often leading to higher rates—sometimes double the cost for poor credit. Good credit generally results in lower premiums.
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.
Some states, like California, Hawaii, and Massachusetts, restrict or prohibit using credit scores in insurance pricing. However, in most states, your credit rating can substantially impact your rates.
Find out how their credit history will affect your policy. Also, according to a state rule, auto and homeowner insurers must check your credit history every three years. They also need to update their records of it.
While major insurers including State Farm, GEICO, and Progressive use credit scores to determine rates, regional insurers CURE Auto Insurance (available in NJ, PA, MI) and Dillo Insurance (available in TX), do not. However, if you live in CA, HI, MA, or MI, laws prevent insurers from using credit to determine rates.
California's Law
Senate Bill 1061 (SB 1061), authored by Senator Monique Limón (D-Santa Barbara) and sponsored by Attorney General Bonta, went into effect on January 1, 2025, and protects consumers from having their credit ruined by medical debt appearing on credit reports.
Credit-based insurance scores were introduced by the Fair Isaac Corporation (FICO) in the early 1990s. FICO estimates approximately 95% of auto insurers and 85% of homeowners' insurers use credit-based insurance scores in states where it is a legally allowed underwriting or risk classification factor.
Pay your bills on time.
One of the most important things you can do to improve your credit score is pay your bills by the due date. You can set up automatic payments from your bank account to help you pay on time, but be sure you have enough money in your account to avoid over- draft fees.
The rule removes a financial information exception for medical accounts and adds a restriction that forbids consumer reporting agencies from supplying medical account information to creditors when they determine a person's ability to take on new debt or expand existing obligations.
However, you have a long time to pay medical bills before they impact your credit, and medical debt under $500 won't affect your credit score at all. Certain unpaid medical debt in collections can negatively impact your credit score, but medical debt under $500 has no effect on your credit.
The "777 rule" in debt collection, also known as the 7-in-7 rule, is a CFPB regulation (Regulation F) limiting calls: collectors can't call more than 7 times in 7 days for a specific debt, nor call within 7 days of a conversation about that debt. It aims to prevent harassment, applying to calls, texts, and emails, though exceptions exist, and the presumption of compliance can be rebutted by aggressive call patterns like rapid succession or highly concentrated calls.
While older models of credit scores used to go as high as 900, you can no longer achieve a 900 credit score. The highest score you can receive today is 850.
Key Things to Know About How State Farm Uses Your Credit Score. State Farm will assign you an auto insurance score, which is based on your credit history, just like your credit score.
FICO® Insurance Scores are snapshots of consumers' insurance risk based on an objective, statistical analysis of credit report information identifying the relative likelihood of an insurance loss, based on the actual loss experience of individuals with similar credit management patterns.
It's partly true: medical debt * does fall off your credit report* after seven years from the first delinquency date, even if unpaid, and paid medical debt is removed sooner (under $500 debt is removed quickly). However, the debt itself doesn't vanish; the statute of limitations for being sued varies by state (3-10 years) and making a payment can restart it, meaning you could still owe the money and face collection efforts, just not via credit reports after seven years.