Does Credit Score Affect Your Car Insurance Rates?

When you think of your credit score, you probably associate it with getting approved for loans, mortgages, or credit cards. But did you know your credit score can also impact your car insurance premiums?

In most U.S. states, insurance companies are legally allowed to use your credit-based insurance score as one of the many factors when determining your auto insurance rates. Understanding how this works—and what you can do about it—can help you save money and avoid surprises.

What Is a Credit-Based Insurance Score?

A credit-based insurance score is a specialized score used by insurers to predict the likelihood of a policyholder filing a claim. While it’s similar to your regular credit score, it's tailored specifically for the insurance industry and focuses on certain financial behaviors.

It typically includes factors like:

  • Payment history (on-time payments, delinquencies)
  • Outstanding debt and credit utilization
  • Length of credit history
  • Types of credit in use
  • New credit inquiries

Why Do Insurance Companies Use It?

Insurance companies argue that individuals with lower credit scores are statistically more likely to file claims. While controversial, several studies have shown a correlation between credit behavior and insurance losses—leading insurers to consider it a risk indicator.

By incorporating credit-based scoring, insurers believe they can price policies more accurately and fairly distribute risk.

States That Restrict Credit Use in Car Insurance

While most states allow credit scoring in auto insurance pricing, a few have banned or limited the practice:

  • California: Prohibits the use of credit scores in setting auto insurance rates
  • Hawaii: Bans credit history from being used in any insurance underwriting
  • Massachusetts: Also restricts use of credit-based scoring
  • Michigan: Has restrictions under recent reform laws
  • Washington: Temporarily banned credit scoring in 2022, though legal challenges continue

Check your state’s regulations to see if your credit score legally impacts your rates.

How Much Can a Credit Score Affect Car Insurance Rates?

The difference can be significant. According to national averages:

  • Drivers with excellent credit (800+) may pay hundreds less annually than those with poor credit (below 600).
  • In some states, a driver with poor credit can pay up to 75% more than one with excellent credit—even with the same driving history.
  • In extreme cases, poor credit may push premiums up by over $1,000 annually.

Example Rate Comparison (2025)

Credit Score Estimated Annual Premium
Excellent (800+) $1,200
Good (700–799) $1,400
Fair (650–699) $1,700
Poor (600–649) $2,200
Very Poor (<600) $2,800+

How to Improve Your Credit-Based Insurance Score

If you're concerned your credit is driving up your auto insurance cost, here are some steps you can take to improve your credit-based score:

  1. Pay all bills on time. Late payments have a major impact on your score.
  2. Reduce credit card balances. Keep utilization below 30%—ideally under 10%.
  3. Avoid opening too many new accounts. Frequent hard inquiries can lower your score.
  4. Check your credit report regularly. Dispute any inaccuracies or fraudulent activity.
  5. Maintain old accounts. A longer credit history is beneficial.

Can You Shop for Insurance Without a Credit Check?

Some insurers offer quotes without checking your credit score. Others may allow you to opt out of credit-based pricing, but your rates might be higher as a result. If credit is a concern, look for insurers known to place less emphasis on it, such as:

  • Root Insurance (uses driving behavior more than credit)
  • Metromile (focuses on usage-based pricing)
  • USAA (may offer more favorable rates to military families regardless of credit)

FAQs About Credit and Car Insurance

Is it legal for insurers to use my credit score?

In most states, yes. However, several states have passed laws to restrict or ban the practice.

Does getting a quote affect my credit score?

No. Insurers perform a soft credit check, which does not impact your score.

Can my insurance company raise my rate if my credit drops?

Yes, in some states. Others restrict how often credit can be checked or used to increase rates.

Can I request that my credit not be considered?

Only in states where the law requires it. Otherwise, it’s up to the insurer’s underwriting policies.

Final Thoughts

Your credit score isn’t just for loans and credit cards—it can influence how much you pay for car insurance. While it may seem unfair, it's a reality for most drivers in 2025. Knowing your score and working to improve it can be a smart way to cut your premiums and keep more money in your pocket.

Be sure to compare insurers, ask how credit affects your rate, and explore discounts that can help offset any added costs.

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