When you apply for auto or homeowners insurance, you might be surprised to learn that your credit history plays a role in what you pay. Many insurance companies in New York, New Jersey, and Pennsylvania use something called a credit-based insurance score to help decide your rates. Understanding this connection can help you manage your insurance costs and avoid unexpected premium increases.
Your credit behavior gives insurers clues about insurance risk. Research shows that people with lower credit scores tend to file more claims and cost insurers more money, even when their driving records look similar. Because of this pattern, insurance companies use credit information as one piece of the puzzle when setting your rates.
At a glance:
- Insurance companies use a credit-based insurance score, not your regular credit score, to help predict how likely you are to file claims and set your premium rates.
- In New York, New Jersey, and Pennsylvania, insurers can consider credit as one factor but cannot use it as the only reason to deny coverage, cancel your policy, or raise your rates.
- Consumers with excellent or good credit typically pay lower premiums, while those with fair or poor credit often pay hundreds or even thousands more per year for the same coverage.
- Improving your credit over time by paying bills on time, reducing debt, and fixing errors on your credit report can eventually lower your insurance costs.
What is a credit-based insurance score?
Your insurance company does not use your regular FICO score. Instead, they use a separate credit-based insurance score built from information in your credit report. This score is designed to predict insurance risk, not whether you will repay a loan.
The main factors that go into this score include your payment history, total outstanding debt, length of credit history, new credit applications, and mix of credit accounts. Insurers combine these credit factors with other information like your driving record, past claims, type of vehicle or property, and where you live to decide your premium.
How much does credit affect your insurance rates?
The impact can be significant. Drivers with poor credit can pay 50 to 75 percent more than similar drivers with strong credit. Consumer testing has found differences of several hundred to over a thousand dollars per year in auto premiums between people whose only major difference is their credit tier.
People with excellent or good credit usually qualify for lower rates on both auto and home insurance. Those with fair or poor credit often face substantially higher premiums for the same coverage.
State rules in New York, New Jersey, and Pennsylvania
All three states allow insurers to use credit information, but with important limits. In New York, state law says insurers cannot use credit as the only reason to deny coverage, cancel your policy, refuse to renew, or increase your premium. They also cannot penalize you for having no credit history.
If your credit report had errors or was hurt by identity theft, New York requires insurers to recalculate your rate and refund any money you overpaid. New Jersey and Pennsylvania have similar frameworks that treat credit as one factor among many, not the sole deciding factor.
What you can do to improve your insurance costs
Because insurers may recheck your credit at renewal, improving your credit over time can eventually lower your rates. Steps that help include paying all bills on time, reducing credit card balances, avoiding unnecessary credit applications, and keeping older positive accounts open.
Check your credit reports regularly for mistakes. Inaccurate negative items can hurt your insurance score. In New York, documented corrections can trigger a rate adjustment and refund.
Shopping around is also crucial. Different insurance companies weigh credit and other risk factors differently, so you may find much better rates by comparing quotes from multiple insurers.
How a public adjuster can help
When you file a property insurance claim, the process can be complicated and stressful. A public adjuster works for you, not the insurance company. They review your policy, document your damage, and negotiate with the insurer to help you get a fair settlement. If premium increases or coverage concerns arise after a claim, a public adjuster in New York, New Jersey, or Pennsylvania can provide guidance and advocate on your behalf throughout the claims process.