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Credit-Based Insurance Scores vs. FICO Scores
Most people know their credit score matters for mortgages and car loans, but it also plays a major role in how much you pay for home insurance. However, insurers don't actually use your standard FICO score. Instead, they generate a separate metric called a credit-based insurance score (CBIS), and the distinction matters.
What Is a Credit-Based Insurance Score?
A credit-based insurance score is a proprietary calculation derived from your credit history that insurers use to predict the likelihood you'll file a claim. FICO's insurance risk scoring models are built to predict the likely "loss relativity" of any individual, which measures whether the cost of your insurance claims relative to your premiums will be higher or lower than average. A higher score signals lower risk, which translates to lower premiums.
Here's how the two compare:
| Factor | Credit-Based Insurance Score (CBIS) | FICO Credit Score |
|---|---|---|
| Primary Purpose | Predicts insurance claim likelihood | Predicts loan repayment probability |
| Who Uses It | Home & auto insurers | Lenders, banks, landlords |
| Soft or Hard Pull? | Soft inquiry (no credit impact) | Hard inquiry (may affect score) |
| Demographic Exclusions | Race, income, gender, age excluded | Same exclusions apply |
| Score Range | Varies by insurer model | 300 to 850 |
What Factors Make Up a CBIS?
FICO looks at five general areas that it believes will best determine how you manage risk: Payment history (40%), Outstanding debt (30%), Credit history length (15%), Pursuit of new credit (10%), and Credit mix (5%).
- Payment History (~40%): On-time vs. late payments
- Outstanding Debt (~30%): Current balances relative to limits
- Length of Credit History (~15%): Age of your oldest and average accounts
- New Credit Applications (~10%): Recent hard inquiries or new accounts
- Credit Mix (~5%): Variety of account types (cards, loans, etc.)
Factors like your income, race, marital status, age, and occupation are prohibited from being used in CBIS calculations.
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How Much Does Your Credit Score Affect Home Insurance Rates?
The impact is larger than most homeowners realize. According to The Zebra's 2026 data, the national average for someone with Excellent credit is $2,260, while the average for someone with Poor credit is $7,260, a difference of 221%. By changing your credit score just one tier, you can save an average of 32% on your home insurance premiums, and the biggest jump is going from Poor credit to Fair credit, which can reduce your premiums by half.
Average Rate Differences by Credit Tier (2026)
| Credit Tier | Approx. FICO Equivalent | Avg. Annual Premium | vs. Excellent Credit |
|---|---|---|---|
| Excellent | 800+ | ~$2,260/yr | Baseline |
| Good | ~740 | ~$2,490/yr | +10% more |
| Fair | ~630-700 | ~$3,600-$4,300/yr | +60% to 90% more |
| Poor | Below 580 | ~$7,260/yr | +221% more |
Research from the Consumer Federation of America and the Climate and Community Institute shows that a typical homeowner with a low credit score will pay nearly $2,000 more each year, or almost double the price, for their insurance premiums than their otherwise identical neighbor with a high credit score. Even homeowners with medium credit scores, roughly equivalent to a 740 FICO score, pay an extra $792 per year, or 39 percent more.
In 23 states, homeowners with low credit (roughly a 630 FICO score) pay at least twice as much as counterparts with high credit scores (roughly 820 FICO). Recent 2026 research from the New York Times also found that in Texas, the advocacy organization Texas Appleseed discovered that some insurers charge individuals with poor credit up to twelve times more than those with excellent credit for specific policies.
Understanding how home insurance underwriting works can help you see why insurers weigh credit so heavily alongside other risk factors like roof age, location, and claims history.
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States That Prohibit Credit-Based Insurance Pricing
Not every state allows insurers to use your credit score when setting home insurance rates. If you live in one of the following states, your credit history cannot be used against you, at least for home insurance purposes.
States with the Strongest Protections
In three states, California, Maryland, and Massachusetts, it is illegal for companies to use credit scores in home insurance pricing.
Key notes by state:
- 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.
- Maryland: In Maryland, homeowners insurance companies can't refuse you coverage, cancel a policy, refuse to renew your policy or base your insurance rates on your credit history or lack thereof.
- Massachusetts: Massachusetts law forbids auto insurance companies from using credit information or credit-based insurance scores when setting rates, and homeowners insurance rates also can't be based on your credit.
- Michigan: Insurance companies in Michigan can't 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.
- Oregon: In Oregon, insurance companies can't 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.
If you live in one of the other 46 states, insurers are permitted, and very likely, using your credit in their pricing model. According to the NAIC, FICO estimates that about 95 percent of auto insurers and 85 percent of homeowners insurers use credit-based insurance scores in states where the practice is allowed.
How to Improve Your Credit Score for Lower Home Insurance Rates
The good news: credit scores can be improved, and the savings can be substantial. Below are the most effective strategies, plus what to do if your credit needs time to recover.
Steps to Boost Your Credit-Based Insurance Score
1. Dispute Errors on Your Credit Report Studies suggest over 25% of credit reports contain errors such as incorrectly reported late payments, duplicate accounts, or outdated collections. Request your free report at AnnualCreditReport.com from all three bureaus (Experian, Equifax, and TransUnion) and dispute any inaccuracies. This is one of the fastest ways to see a score jump.
2. Pay Bills On Time, Every Time Payment history carries the most weight (~40%) in both your FICO and CBIS. Set up autopay or calendar reminders. Even one missed payment can cause a meaningful dip, while consistent on-time payments will steadily lift your score over 6 to 12 months.
3. Lower Your Credit Utilization Ratio Aim to use less than 30% of your available credit across all cards. Paying down balances, even partially, can produce a noticeable score improvement within 30 to 45 days once your creditors report updated balances.
4. Keep Old Accounts Open The length of your credit history accounts for roughly 15% of your score. Closing old credit cards shortens your average account age and can actually lower your score. Keep them open even if you rarely use them.
5. Avoid Opening New Accounts Unnecessarily Each new application generates a hard inquiry and lowers your average account age. Avoid applying for new cards or loans in the months before you plan to shop for or renew home insurance.
How Long Until Your Insurance Rates Improve?
Credit changes typically appear in your score within 30 to 45 days of being reported by creditors. However, meaningful rate improvements from insurers usually take 6+ months of consistent habits. Once your score climbs, proactively ask your insurer to re-pull your credit or shop competing quotes, since insurers won't automatically lower your rate mid-term. Check out these proven ways to lower your premium alongside credit improvements.
Options If You Have Bad Credit Right Now
If improving your credit will take time, you still have options:
Among insurers considered more lenient with credit in 2026, Allstate is the cheapest home insurance company for people with bad credit with an annual rate of $4,585 on average, followed by Nationwide and Progressive. However, even Allstate customers with bad credit still pay more than double that of customers with good credit. U.S. News also ranks State Farm as "Best for Low Credit" among major carriers, and CNBC Select highlights Nationwide as "Best for bad credit." Rates vary significantly by location and home profile, so always compare multiple quotes. If you need help finding coverage, check out our guide on cheap home insurance for 12 more affordable strategies.
If private market insurers won't offer coverage or rates are unaffordable, you may qualify as high risk home insurance and need to contact your state's FAIR Plan (Fair Access to Insurance Requirements) as a backstop option, though coverage is typically more limited.
Frequently Asked Questions
Does my credit score directly affect my home insurance premium?
Not directly. Insurers don't use your FICO score itself. Instead, they pull your credit history and generate a credit-based insurance score (CBIS), which is a proprietary metric calibrated to predict claim likelihood. This score then influences your premium tier, and a higher CBIS typically means lower premiums while a lower CBIS can significantly increase what you pay.
How much can bad credit increase my home insurance rates?
The increase can be dramatic. According to The Zebra's 2026 data, homeowners with poor credit pay a national average of $7,260 per year compared to $2,260 for those with excellent credit, a 221% difference. In some states like Oklahoma, the gap can exceed $17,000 per year. NerdWallet's 2026 analysis pegs the poor-credit premium at roughly 72% higher for a $400,000 dwelling policy.
Which states don't allow credit scores in home insurance pricing?
California, Maryland, and Massachusetts fully prohibit the use of credit history in setting home insurance rates. Michigan has significant restrictions, and Oregon limits credit use for cancellations and non-renewals. If you live outside these states, it's very likely your insurer is factoring your credit into your premium since 85% of homeowners insurers use CBIS where allowed.
Will shopping for home insurance quotes hurt my credit score?
No. Insurers use soft credit inquiries when pulling your credit history for insurance quotes. Soft pulls do not appear on your credit report as inquiries and will not affect your FICO score. You can freely shop multiple quotes without any negative credit impact, which is why we recommend getting a fresh home insurance quote at least once a year.
What can I do to lower my home insurance if I have bad credit?
Start by disputing any errors on your credit report, paying down balances, and making all future payments on time, since these moves can improve your score within a few months. In the short term, shop multiple insurers (Allstate, Nationwide, and State Farm tend to weigh credit less heavily), raise your deductible, bundle policies, and add safety features to your home. If you live in California, Maryland, or Massachusetts, your credit cannot be used against you at all.