Your credit score significantly affects your insurance rates in most states. Drivers with poor credit pay 40% to 100% more for auto insurance than those with excellent credit. Homeowners insurance shows a similar pattern. Illinois, Texas, Indiana, and Minnesota all allow credit-based insurance scoring.
Most people know that their credit score affects their mortgage rate, credit card APR, and ability to rent an apartment. But many are surprised to learn that credit plays a major role in how much they pay for auto and home insurance. In Illinois, your credit-based insurance score can cause your premiums to vary by 40% to 100% or more — even if everything else about your profile is identical.
Here is how it works, why insurers care about credit, and what you can do about it.
Credit Score vs. Insurance Score: What’s the Difference?
Insurance companies do not use your FICO credit score directly. Instead, they use a credit-based insurance score — a separate scoring model built specifically for predicting insurance risk. The two most common models are LexisNexis Insurance Score and TransUnion’s CreditVision.
Your insurance score uses some of the same data as your credit score, but weights it differently:
| Factor | Weight in Insurance Score |
|---|---|
| Payment history | ~40% (most important) |
| Outstanding debt / utilization | ~30% |
| Length of credit history | ~15% |
| New credit inquiries | ~10% |
| Credit mix | ~5% |
Notably, your insurance score does NOT consider your income, employment status, race, religion, gender, marital status, or nationality. It is purely based on your credit report data.
Why Do Insurers Care About Credit?
This is the question everyone asks, and the answer comes down to statistical correlation. Decades of actuarial research have shown that people with lower credit-based insurance scores file more claims and have higher claim costs than people with higher scores. Insurance companies are not making a moral judgment about your financial habits — they are using data to predict risk.
The correlation is strong enough that nearly every major insurance carrier in the country uses credit as a rating factor. Studies by the Federal Trade Commission (FTC) and the National Association of Insurance Commissioners (NAIC) have confirmed that credit-based insurance scores are effective predictors of insurance losses.
That said, this practice is controversial. Consumer advocates argue that it disproportionately penalizes people who face financial hardship. Several states have banned or restricted the use of credit in insurance pricing — but Illinois is not one of them.
Texas also allows insurers to use credit-based insurance scores, and the impact there can be even more pronounced. Because Texas base premiums for home and auto insurance are already among the highest in the nation — driven by hail, hurricanes, and heavy traffic — a credit-related surcharge gets applied on top of an already elevated rate. A Texas homeowner with fair credit could easily pay $1,500 to $2,000 more per year than a neighbor with excellent credit for the same property and coverage. For Texas residents, comparing carriers is especially valuable because each carrier weights credit differently against weather-risk factors.
How Much Does Credit Affect Your Premium?
The impact is significant. Here is what the data shows for Illinois:
Auto Insurance
| Credit Tier | Average Annual Premium | Difference from “Excellent” |
|---|---|---|
| Excellent (800+) | $1,100–$1,400 | — |
| Good (670–799) | $1,300–$1,700 | +15% to 25% |
| Fair (580–669) | $1,700–$2,300 | +40% to 65% |
| Poor (below 580) | $2,200–$3,200 | +70% to 130% |
Home Insurance
The pattern is similar for homeowners insurance, though the dollar differences tend to be somewhat smaller because base premiums are lower. A homeowner with poor credit can expect to pay 30% to 70% more than a homeowner with excellent credit for the same property and coverage.
The takeaway: improving your credit from “fair” to “good” can save you $400 to $800 per year on auto insurance alone. For a household with two cars and a home, the combined savings can exceed $1,000 annually.
When Does Your Credit Get Checked?
Insurers pull your credit-based insurance score at two key points:
- When you first apply for a policy. Your initial rate is partly based on your insurance score at the time of quoting.
- At renewal. Most carriers re-check your credit at each renewal period (every 6 or 12 months). If your credit has improved, your rate may go down automatically. If it has declined, your rate may go up.
Insurance credit checks are considered “soft inquiries” and do NOT affect your credit score. You will not even see them on most credit reports. Shopping for insurance quotes will never hurt your credit.
How to Improve Your Insurance Score
Since your insurance score is derived from your credit report, improving your credit improves your insurance score. Here are the most impactful steps:
1. Pay Bills on Time — Every Time
Payment history is the single largest factor. Even one 30-day late payment can drop your score significantly. Set up autopay for at least the minimum payment on every account.
2. Reduce Credit Card Balances
Your credit utilization ratio (how much of your available credit you are using) is the second most important factor. Aim to keep utilization below 30% on each card, and below 10% for the best scores. Paying down balances is the fastest way to improve your score.
3. Keep Old Accounts Open
The length of your credit history matters. Do not close old credit cards, even if you do not use them. The age of your oldest account and the average age of all accounts both factor into your score.
4. Limit New Credit Applications
Each hard inquiry (credit card applications, loan applications) can temporarily lower your score. Avoid opening multiple new accounts in a short period.
5. Check Your Credit Report for Errors
Errors on credit reports are surprisingly common. Review your reports from all three bureaus (Equifax, Experian, TransUnion) at AnnualCreditReport.com and dispute any inaccuracies. A single incorrect late payment or an account that is not yours can drag your score down.
6. Diversify Your Credit Mix
Having a mix of credit types (credit cards, installment loans, mortgage) is better for your score than having only one type. This is a smaller factor, but it matters at the margins.
What If Your Credit Is Poor Right Now?
If your credit is not great, you are not stuck paying the highest rates forever. Here is what you can do right now:
- Shop aggressively. Different carriers weigh credit differently. Some carriers are more forgiving of lower scores than others. An independent agent can compare 22+ carriers to find the one that gives you the best rate for your specific credit profile.
- Ask about credit re-scoring. Some carriers will re-pull your credit mid-term if you can show significant improvement. Not all do this, but it is worth asking.
- Bundle your policies. Multi-policy discounts can offset some of the credit-related surcharge.
- Increase deductibles. A higher deductible lowers your base premium, which reduces the dollar impact of any credit-based surcharge.
- Improve your credit and re-shop at renewal. Credit improvement takes time, but even six months of consistent on-time payments and balance reduction can move the needle enough to lower your rate at the next renewal.
Illinois-Specific Rules
Illinois allows insurers to use credit-based insurance scores in pricing, but with some protections:
- Insurers cannot use credit as the sole factor in pricing, canceling, or non-renewing a policy
- Insurers must inform you if your credit negatively affected your rate
- If your credit was impacted by an extraordinary life event (job loss, divorce, death of a spouse, medical emergency), you can request that the insurer reconsider your rate. Many carriers have formal exception processes for these situations.
- Your credit cannot be used in a discriminatory manner
The Bottom Line
Your credit-based insurance score is one of the biggest factors in what you pay for auto and home insurance — often as impactful as your driving record or the age of your home. Improving your credit is one of the most effective ways to lower your insurance costs, and the savings compound year after year.
In the meantime, make sure you are not overpaying for your current credit tier. Different carriers treat credit very differently, and the right carrier for someone with a 650 score is not the same as the right carrier for someone with an 800. We compare rates from 22+ carriers to find you the best match.
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