Introduction
Wondering how your credit score affects car insurance? You’re not alone. While it might seem unrelated to driving, your credit history plays a key role in how insurers calculate your premiums. In most states, having a strong credit score can lower your auto insurance rates, while a poor one can cost you more.
Why Credit Scores Impact Car Insurance Premiums
Insurance companies use a version of your credit report — called a credit-based insurance score — to help predict how likely you are to file a claim. Statistically, people with poor credit tend to file more claims, so insurers consider this a risk factor.
What Goes Into the Score?
Your credit-based insurance score may include:
- Payment history
- Total debt
- Length of credit history
- Types of credit used
- Recent credit inquiries
For a deeper dive into how this score differs from your FICO score, see this guide from Consumer Reports.
How Much Can a Credit Score Affect Insurance?
The difference in premiums can be dramatic:
| Credit Score | Estimated Monthly Rate |
|---|---|
| Excellent | $110 |
| Average | $145 |
| Poor | $210+ |
Insurers can legally charge much more if your credit is low — even if your driving record is clean.
States That Restrict Credit Use in Car Insurance
Not all states allow insurers to use credit scores. Here are some that restrict or ban the practice:
- California
- Hawaii
- Massachusetts
- Michigan (with limitations)
To check what’s allowed in your area, visit NAIC’s official state regulations page.
How to Lower Your Car Insurance Despite a Low Credit Score
Don’t worry if your credit isn’t perfect — you can still save:
- Shop multiple insurers using platforms like The Zebra
- Take advantage of safe driver or low-mileage discounts
- Bundle with renters or homeowners insurance
- Consider usage-based insurance plans
Read more: How to Get Cheap Car Insurance Without Sacrificing Coverage
Improve Your Credit Score to Reduce Your Rates
Boosting your credit can significantly lower your premiums over time. Try to:
- Pay bills on time
- Keep credit card balances low
- Avoid unnecessary hard inquiries
- Monitor your credit report for errors at AnnualCreditReport.com
No Credit History? Here’s What to Do
New drivers or young adults with no credit history may face higher premiums too. If that’s you:
- Join a parent or guardian’s policy if possible
- Look into first-time driver insurance options
- Use telematics programs that reward safe driving
Explore more in our guide: Car Insurance for First-Time Drivers
Conclusion
So, yes — your credit score affects car insurance rates in most states. While it may seem unfair, insurers use your credit as a risk indicator. By improving your credit and comparing quotes, you can still find an affordable plan that works for your budget.