Democratic lawmakers in the Iowa House of Representatives have introduced legislation that would prohibit insurers from using credit scores when underwriting or rating automobile policies, a move that could reshape how 140% premium penalties are applied to drivers with poor credit in the state.
The bill, House File 2259, would update the definition of "personal insurance" to exclude private passenger auto, snowmobile, and recreational vehicle policies, effectively removing credit scoring from the underwriting process for those coverage types.
Under existing Iowa law, insurers can use credit scores to underwrite and rate risks for private passenger, snowmobile, and recreational vehicle policies. However, carriers cannot rely solely on credit information to deny, cancel, or refuse renewal without considering other factors. Regulations also require insurers to use credit scores updated within the prior 90 days.
Iowa drivers with poor credit currently pay 140% more than those with excellent credit – a penalty higher than the national average.
Bankrate estimates that drivers with poor credit pay 105% more for full coverage nationally, while analysis from The Zebra found drivers with poor credit pay $1,421 more annually than those with exceptional credit, even with identical driving records.
If passed, the legislation would align Iowa with states that have banned or restricted credit-based insurance scoring. California, Hawaii, Massachusetts, and Michigan currently prohibit the practice outright, according to the National Association of Insurance Commissioners. Michigan's 2020 ban is the most recent.
Maryland, Oregon, and Utah impose partial restrictions. Maryland allows credit scores for initial rates but prohibits cancellations based on credit history. Oregon applies similar limits, while Utah restricts credit use to offering discounts rather than increasing rates.
Washington attempted a comprehensive three-year credit ban in 2021, but courts overturned it for exceeding statutory authority.
The debate has drawn opposing views from stakeholders. Insurers maintain that credit-based scoring enables them to evaluate an individual's risk profile, according to the NAIC. Consumer advocacy groups argue the practice disproportionately affects lower-income and minority policyholders.
New York Assemblymember Pamela Hunter, who introduced similar legislation in February 2025, argued that credit scores are an unreliable measure of driving risk: "While many carriers might argue that there is a correlation between credit scores and driving history, it is just that, correlation and not causation."
New Mexico lawmakers introduced a comparable bill the same month. A 2023 Consumer Federation of America report found that a New Mexico driver with an excellent record but poor credit would pay $733 annually, compared to $412 for one with excellent credit.
Credit rating agencies estimate that 95% of auto insurers incorporate credit scores into their underwriting processes where permitted, the NAIC said.
