How Credit Scores Affect Your Insurance Rates (and What You Can Do About It)

Most people think of credit scores as affecting only loans, credit cards, and mortgage approvals. But your credit also plays a major role in what you pay for insurance, especially in states like Texas, where insurers use credit-based insurance scores to help determine pricing.

Understanding how credit scores affect insurance rates gives you more control over your coverage. Small credit improvements lead to meaningful savings, while ignoring your credit may cause your premiums to creep up year after year. 

Credit scoring in insurance isn’t about your income or personal background. Instead, insurers look at financial patterns that have statistically been shown to predict the likelihood of filing a claim. People with higher credit scores tend to file fewer or less severe claims.  This is why they often receive more favorable pricing. Those with lower scores aren’t penalized based on personal circumstances; they’re simply assigned a risk tier that reflects historical data.

This process can feel confusing or even unfair if you don’t realize it’s happening. But once you understand the connection, you can take simple steps to strengthen your profile and potentially lower your premiums over time.

Why Credit Scores Matter in Insurance

Insurance companies use credit-based insurance scores because they’ve found a strong link between credit behavior and claim patterns. It may not seem intuitive, but decades of data show that people who manage credit responsibly tend to file fewer claims.

Insurers use this information to group customers into pricing tiers. A high score indicates lower perceived risk which often results in lower premiums. A lower score indicates a higher predicted risk which can increase costs. 

Your credit doesn’t just affect what you pay when you first purchase a policy. Many insurers check credit again at renewal or during certain policy updates. If your credit improves, your price may improve too. If it drops, your premium could increase even if nothing else about your life has changed.

Credit isn’t the only factor that affects your rates. Things like your driving history, home construction details, roof age, and location all matter too. But credit can be surprisingly important in the bigger picture.

If you’ve also noticed your mortgage escrow rising, our article Why Your Mortgage Keeps Going Up explains why home insurance costs sometimes increase and how to keep those expenses under control.

What goes into an insurance credit score

Insurance scoring models are different from the FICO score you see on your credit report. They focus on specific factors that have been shown to align with insurance claims.

Here are the main elements insurers consider:

Payment history: Consistent on-time payments are one of the strongest indicators of financial stability.

Credit utilization: Lower balances relative to your limits help boost your score.

Credit mix: A combination of revolving and installment accounts is viewed favorably.

Length of credit history: Older accounts contribute to higher stability.

New credit inquiries: Opening too many accounts within a short timeframe can temporarily lower your score.

What insurers don’t look at: income, job history, gender, marital status, race, or personal savings. These factors are never included in insurance scoring models.

How Credit Scores Affect Your Insurance Rates

While every insurer uses its own proprietary formula, credit generally influences rates in three key ways:

• First, it helps companies categorize risk. Customers are typically sorted into credit tiers such as excellent, good, fair, or poor. Your tier determines which pricing bracket you qualify for.
• Second, your credit may influence rate changes at renewal. Improving your score between terms may help reduce your premium. Declining credit could have the opposite effect.
• Third, credit tends to impact auto insurance more heavily than home insurance. Auto companies rely more on credit-based scoring because of its strong correlation with claims frequency. Home insurers consider credit, too, but they also weigh property-specific factors like roof age, construction type, and regional weather risks. 

Texas is one of the states that allows insurers to use this type of scoring. That makes it even more critical for Freshquote customers to understand how credit affects pricing and how they can manage it.

How to Improve Your Insurance Rates Through Better Credit

If your credit isn’t where you want it to be, small improvements can make a big difference in your insurance pricing over time.

Here are some helpful steps:

• Make on-time payments a priority. Payment history carries the most weight.
• Keep credit card balances low. Using less than 30% of your available credit is a common benchmark.
• Dispute inaccurate information. Credit report errors are more common than most people realize.
• Limit new credit applications. Multiple inquiries in a short period can temporarily lower your score.
• Keep older accounts open. The longer your credit history, the better.
• Request a re-score. If your credit has significantly improved, ask your insurer to re-evaluate your rate based on your new score.

Even modest improvements in your credit can help you move into a better pricing tier, sometimes saving hundreds of dollars per year on insurance alone.

Ways to Lower Your Insurance Costs Even If Your Credit Isn’t Perfect

Credit is only one part of the insurance equation. You still have many ways to keep your premiums affordable:

• Bundling home and auto insurance
• Increasing your deductible
• Installing smart-home or safety devices
• Staying claim-free
• Taking advantage of discounts you may not realize you qualify for
• Updating your home’s roof, wiring, or plumbing

These savings opportunities can significantly reduce your premium regardless of where your credit stands today.

If you’re also considering changes to your deductible to help manage costs, our article High vs. Low Deductibles breaks down the difference between high and low deductibles and how each one affects your premium.

Understanding how credit scores affect insurance rates gives you a clear advantage. You don’t have to guess why your premium changed or feel stuck with your current pricing. Once you know what insurers look for, take meaningful steps to improve your score, explore new savings opportunities, and make confident decisions about your coverage. 

Whether you’re working on building credit or maintaining strong financial habits, a little awareness goes a long way. Over time, these small efforts can keep your insurance affordable and help protect the things that matter most.