Auto Insurance Without Credit Score Requirements: Who's Offering?

Credit scores are a key factor in determining auto insurance rates. While most auto insurance companies use credit scores to set rates, there are a few that don't. In this article, we will explore the topic of auto insurance companies that do not use credit scores and provide an overview of the alternative factors that influence insurance rates. We will also discuss the impact of credit scores on insurance premiums and the states that have banned the use of credit scores in setting insurance rates. By the end of this article, readers should have a comprehensive understanding of the role of credit scores in auto insurance and the options available for those seeking coverage without credit score considerations.

Usage-based insurance

With usage-based insurance, you pay for insurance coverage that is correlated with how much you drive. The more you drive, the more risk you take on, and so the higher your premium. The less you drive, the less risk there is, and so the lower your premium. This type of insurance can be more equitable as it focuses on factors that are within the driver's control, rather than demographic factors like age, gender, or credit score, which are used by traditional insurance companies.

While usage-based insurance can help safe and low-mileage drivers save money, it may not be ideal for those who travel longer distances, as it can be more expensive than traditional insurance in these cases. It's important to note that usage-based insurance programs are completely voluntary, and you can opt-out at any time.

Some usage-based insurance options include:

• Milewise® from Allstate
• SmartMiles® from Nationwide
• Metromile
• American Family Insurance

Telematics insurance

• Diagnostic port plug-in devices
• Smartphone apps
• Built-in options like OnStar

There are two main types of telematics car insurance programs: safe driving programs and pay-per-mile programs.

Safe driving programs:

These programs award discounts based on safe driving habits. Examples include Progressive’s Snapshot®, Geico’s DriveEasy and State Farm’s Drive Safe & SaveTM. These programs usually track a combination of the following:

• Acceleration smoothness
• Hard braking
• Phone use while driving
• Harsh cornering
• Rush-hour and nighttime driving

Pay-per-mile car insurance:

With pay-per-mile programs, your bill reflects the number of miles you drive. Examples include Allstate’s Milewise®, Nationwide’s SmartMiles® and Metromile. Pay-per-mile insurance pricing is calculated using a base daily rate and a rate per mile. The less you drive, the lower your bill will be.

While telematics insurance can lead to lower rates for safe drivers, it can also increase rates for those who are categorised as "bad drivers". It's important to note that not all states allow insurance companies to use credit scores when determining insurance rates. Currently, California, Hawaii, Maryland, Massachusetts and Michigan ban or limit the use of credit scores for setting policy rates.

States that outlaw credit scores in pricing

Several US states have outlawed the use of credit scores in determining auto insurance pricing. These states include:

California

California has had a statewide ban on the practice of using credit scoring in insurance since 2003. Insurance companies in the state are prohibited from using credit scores or credit history information when approving or determining rates on auto policies or home insurance.

Hawaii

Hawaii does not allow insurance companies to use credit information when setting underwriting standards or rating plans for auto insurance. This means that an individual's credit cannot impact their car insurance premiums or their policy's chances of being approved or renewed. However, Hawaii still allows credit to be a factor in homeowner insurance plans.

Maryland

Maryland has strict rules regarding credit scoring for home insurance. Home insurance providers cannot consider credit during any part of the policy process, including applications, renewals, rates, and premiums. For auto insurance, Maryland insurance companies cannot use credit to deny a policy, cancel a policy, deny a renewal, or increase premiums during a renewal. However, they can use credit information to determine insurance rates.

Massachusetts

Massachusetts bans auto insurers from using credit scoring when setting rates and approving or renewing auto policies. Homeowner insurance companies are also not allowed to base rates on a customer's credit information.

Michigan

In Michigan, both home and auto insurance providers cannot use credit scoring when approving, denying, cancelling, or renewing policies. Auto insurance companies also cannot use credit scores to determine a person's insurance rate.

Oregon

Oregon prohibits insurance companies from using credit information to cancel or deny a policy approval. Credit cannot be the only reason an insurance provider denies an application, and the state limits what information from a person's credit report can be used when determining insurance rates and in the underwriting process.

Utah

Utah allows insurance companies to consider credit information when reviewing an application, but it cannot be the sole reason for denying an applicant. Auto insurers can use credit data only to offer customers a discount on their premiums, not to increase rates. Once a customer has been with the company for 60 days, the insurer cannot use credit data to cancel or refuse to renew a policy or decline coverage for a new vehicle.

Nevada

Nevada has temporarily restricted how insurance companies can use credit-based insurance scores. Through May 20, 2024, insurance companies in the state cannot consider negative credit information from events that occurred after March 1, 2020, to deny, cancel, or refuse to renew a policy or increase premiums. This restriction may become permanent.

Washington

Washington is the most recent state to consider banning credit scoring in insurance due to the COVID-19 pandemic. The state was concerned that insurance companies would increase rates as people faced financial difficulties and saw their credit scores drop due to missed or late payments or loan defaults. In March 2022, Washington announced a temporary three-year ban on using credit reports and scores to change rates and premiums on insurance policies, including auto, renter, and homeowner insurance.

Improving your credit score

• Pay your bills on time: Late or missing payments can lower your score, so making regular, on-time payments is one of the best ways to bring it up. Set up automatic payments or calendar alerts to help you stay on top of your bills.
• Keep your credit card balances and overall credit card debt low: Ideally, the amount you borrow should be less than 30% of your available credit limit, known as your credit utilization rate. Pay off your credit card debt as soon as possible and only charge what you can pay off each month.
• Be cautious about new credit applications: New accounts and multiple credit applications can lower your score and make lenders see you as a higher risk. Avoid applying for new credit cards, especially if you know you'll be looking for a large loan soon.
• Use a combination of credit types: In addition to credit cards, consider taking out other types of credit such as student loans, a car loan, or a mortgage to improve your credit mix.
• Aim for a longer credit history: The longer your credit card accounts are open and in good standing, the better it is for your score. Keep your oldest credit card accounts open and active, even if you no longer use them regularly.
• Check your credit report regularly: Obtain a free credit report from the three major credit reporting agencies (Experian, Equifax, and TransUnion) and review it for any errors or inaccuracies. Dispute any incorrect information to help improve your score.

By following these steps and maintaining good financial habits, you can work towards improving your credit score over time.

Pay-per-mile insurance

While most auto insurance companies use credit scores to set rates and approve or renew auto policies, there are a few companies that sell auto insurance with no credit check, and some states that do not allow insurance companies to use credit scores when determining insurance rates.

Usage-based insurance, also known as pay-per-mile insurance, is a good option for infrequent drivers. With this type of insurance, your monthly premium is based on the distance you drive, rather than a fixed annual or semi-annual rate. This means that even if you have a poor credit score, low usage of your vehicle could outweigh any potential impact on your insurance premium.

Metromile

Metromile offers reliable, high-quality pay-per-mile car insurance. With Metromile, you pay a low monthly rate, plus a few cents for each mile you drive. All miles over 250 per day are free, so you don't have to worry about "going over" on your miles. Metromile offers flexible coverage options that you can customize to meet your needs, including accidents with another vehicle, a fixed object, motorists, and more. They also offer roadside assistance, glass repair, and 24/7 support from their claims team. Filing a claim is easy and can be done through their app or online.

Milewise® from Allstate

Milewise is another usage-based insurance option that bases your premium on the distance you drive. However, keep in mind that usage-based insurance may not be ideal for drivers who travel longer distances, as it can actually be more expensive than traditional car insurance if you drive every day.

Root Insurance

While Root Insurance has not yet phased out the use of credit scores when setting rates, it is a telematics insurance company that bases your insurance rates primarily on your driving performance and frequency rather than demographics alone.

CURE, Dillo and Empower

These companies sell auto insurance with no credit check, with Dillo and Empower Insurance only available in Texas. CURE, which stands for Citizens United Reciprocal Exchange, is a nonprofit insurance carrier that bases rates on customers' driving records and is currently available in Michigan, New Jersey, and Pennsylvania. Dillo Insurance provides auto insurance policies to customers with tickets, accidents, lapses in coverage, or no prior coverage without checking credit. Empower Insurance offers several car insurance options, some of which don't use credit when calculating premiums.

State-specific options

If you live in California, Hawaii, or Massachusetts, your credit score is not a rating factor for insurance rates. In Maryland, Utah, and Oregon, insurance companies cannot use your credit score as a basis for canceling or refusing to renew an auto insurance policy, but they can still use it to determine your premium.

Frequently asked questions