By Cribb Insurance Group Inc • Bentonville, AR • Based on Arkansas Code § 23-67-401 et seq.

What “credit-based” really means when an agent says it

When a carrier or agent tells you your rate is “credit-based,” it’s easy to hear that as “they pulled my credit score and charged me for it.” That’s not quite what’s happening — and the difference matters.

Insurers use a credit-based insurance score. It’s a distinct number, calculated from information in your credit report, that statistically correlates with the likelihood of filing a future claim. It is not your FICO or VantageScore, even though both are built from the same underlying credit file. A person can have an excellent lending credit score and a mediocre insurance score, or vice versa, because the two models weigh things differently and are built for completely different purposes.

Think of it as the insurance industry’s own “credit equivalent”: same raw ingredients, different recipe, different goal.

What data actually goes into an Arkansas insurance score — and what’s banned

This is where most confusion lives. The score draws from your credit report, but Arkansas Code § 23-67-405(1) specifically prohibits several inputs. Here’s the honest breakdown:

Can be used (from your credit report)	Banned from the score by AR law
Payment history — on-time payments vs. late payments, collections, charge-offs	Income
Outstanding debt and how much of your available credit you’re using	Gender
Length / age of your credit history	Address & ZIP code
Pursuit of new credit — how many new accounts you’ve recently opened	Ethnicity, religion, nationality
Mix of credit types you manage	Marital status

Notice what’s not on the left: your income and debt-to-income ratio are not part of an insurance score. Insurers generally don’t have your income, and Arkansas law expressly forbids building the score from it. Debt-to-income is a lending concept — it matters for a mortgage underwriter, not for your insurance score.

The biggest myth: does shopping around or switching carriers hurt your score?

Many people believe insurance shopping works like loan shopping — that every quote dings you, the way applying for several credit cards can. For insurance, that’s simply not how Arkansas law allows it to work.

Under Ark. Code § 23-67-405(8), a carrier may not use the following as a negative factor when scoring you:

• Credit inquiries you didn’t initiate, and inquiries you make to check your own credit (these are “soft pulls”).
• Inquiries identified on your report as relating to insurance coverage.
• Multiple auto-loan or home-mortgage lender inquiries coded within 30 days of each other — the law requires they be counted as a single inquiry (rate-shopping protection).

So where does the “applying for credit all the time hurts you” idea come from? It’s partly true — but only for new credit accounts, not insurance shopping. If you open several new credit cards or loans in a short window, that changes the “pursuit of new credit” data in your actual credit file, which the insurance score reads. Getting three homeowners quotes from three agencies does not. Those are two different behaviors that people lump together.

What people confuse with the score — but are really separate factors

Here’s the crux of the “my rate is credit-based” confusion. Your insurance score is one ingredient in your premium — not the whole meal. The Arkansas Insurance Department is explicit that credit is simply one of many factors carriers weigh. Several things that clearly affect your rate have nothing to do with your credit-based score:

Factor	Affects premium?	Part of the credit-based score?
Claims history (tracked via your CLUE loss report)	Yes	No — separate
Location / rating territory (your ZIP)	Yes	No — ZIP is banned from the score
Insurance stability — number of carriers / times switched in the past 5 years	Yes	No — separate
Prior coverage limits carried (higher prior limits → better tier)	Yes	No — separate
Prior coverage continuity & lapses (insurance tenure)	Yes	No — separate
Vehicle history by VIN — prior claims/damage tied to the vehicle	Yes	No — separate
Drivers in your household	Yes	No — each person has their own score
Vehicle details, mileage, deductibles	Yes	No — separate
Credit-based insurance score	Yes	This is the score

A quick way to think about each of the factors people ask about:

• Claims & household members: A claim, or adding a young driver to your policy, can raise your premium — but through claims and driver rating, not by changing your credit-based score. Each household member also has their own separate score.
• Location: Where you live absolutely moves your rate through territory rating, but your ZIP code is banned from the credit-based score itself.
• Years of prior insurance: A long, unbroken history of continuous coverage helps your premium as a prior-coverage factor. A lapse can hurt it. Neither touches your credit-based score.
• How often you’ve switched: Here’s an important distinction — getting quotes is free and legally can’t be held against you. But how many carriers you’ve actually held, and how often you’ve switched over the past five years, is a separate “insurance stability” signal. Bouncing between four carriers in five years can read as higher-risk to an underwriter, even though shopping the market never touches your score.
• The vehicle’s own history: Rating isn’t just about you — it’s about the car. Carriers pull the VIN, which reveals the vehicle’s prior claims and damage history, even from before you owned it. A car with a heavy loss record or prior structural damage can rate differently, especially for comprehensive and collision coverage.
• Your prior liability limits: The limits you carried before you applied say something about your risk profile. Coming in with higher prior limits (say 100/300 rather than state minimums) tends to place you in a better tier; arriving with bare-minimum prior coverage can point you toward a non-standard tier.

How it all comes together: your rating tier

Here’s the piece that ties everything above together. No single factor — not your credit-based insurance score, not your claims, not your vehicle — sets your price on its own. Instead, the carrier weighs all of these inputs together and uses them to place your policy into a rating tier.

That tier is what ultimately maps to your premium. Carriers use different labels — some use names like preferred, standard, and non-standard; others use numbered tiers — but the idea is the same: your whole profile is scored, and the tier you land in determines what you pay.

This is why two neighbors with the same car and the same credit score can pay very different rates: one may carry higher prior limits and a spotless five-year carrier history, while the other switched carriers three times and had a lapse. Same score, different tier. It’s also why improving one factor — cleaning up a credit error, closing a coverage gap, raising your prior limits at renewal — can nudge you into a better tier and lower your rate even if nothing else changes.

Your protections under Arkansas law

Arkansas’s Use of Credit Information in Personal Insurance Act (Ark. Code §§ 23-67-401 through 23-67-415) builds in real guardrails. Worth knowing:

• Credit can’t be the only reason. A carrier can’t deny, cancel, non-renew, or set your renewal rate solely on credit without weighing other factors (§ 23-67-405(2)–(3)).
• No credit card isn’t an automatic penalty. You can’t be hit with an adverse action just because you don’t have a credit card (§ 23-67-405(4)).
• Thin or no credit is treated fairly. If you have little or no credit history, the insurer must treat you as having neutral credit or as otherwise approved by the Commissioner (§ 23-67-405(5)).
• Only recent data for adverse actions. Any adverse action based on credit must rely on a report or score pulled within the last 90 days (§ 23-67-405(6)).
• Your score gets refreshed. Carriers must re-pull and recalculate at least once every 36 months — and if your credit improves, you can submit a written request to have your policy re-rated on current information (§ 23-67-405(7)).
• You’re told up front. At application, the insurer or agent must disclose that credit information may be used (§ 23-67-407).
• You can dispute errors. If an adverse action was based on inaccurate credit data, you can dispute it under the federal Fair Credit Reporting Act and ask the carrier to reconsider. If your credit was damaged by an extraordinary life event, ask your carrier what exception process they offer.

How to keep your insurance score healthy

Because the score reads your credit file, the same habits that build good credit tend to build a good insurance score:

1. Pay every bill on time — payment history is the heaviest input.
2. Keep balances low relative to your limits.
3. Let accounts age; don’t close your oldest cards without reason.
4. Open new credit only when you need it — a burst of new accounts can weigh on the score.
5. Check your credit report for errors and dispute them; a corrected report can mean a re-rate.
6. Shop your insurance freely — it costs your score nothing, and it’s the fastest way to know if you’re overpaying.

Frequently asked questions

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Cribb Insurance Group Inc • 1601 SW Regional Airport Blvd, Bentonville, AR 72713. This article is general information about how credit-based insurance scores are used under Arkansas law and is not legal advice or a guarantee of coverage, rates, or eligibility. Scoring models, underwriting rules, and pricing vary by carrier, and statutes may change; the provisions described reflect Arkansas Code § 23-67-401 et seq. as of 2026. For guidance on your specific situation, speak with a licensed Arkansas insurance agent.