How Your Credit Score Affects Car Insurance Rates

In most states, a lower credit score raises your car insurance rate because insurers use a credit-based insurance score to predict how likely you are to file a claim — drivers with poor credit often pay 50-100% more than drivers with excellent credit for the same coverage ([learn more about cash-out refinance vs (learn more about mortgage rate forecast 2026: what major housing economists predict for 30-year rates) (learn more about best home renovation loan lenders of 2026: 7 options compared) (learn more about 7 best mortgage refinance lenders of 2026: ranked by rate, fees, (learn more about best heloc lenders 2026: 7 lenders ranked on rate, draw period, and fees) (learn more about best mortgage refinance lenders 2026: top 7 ranked for rate, speed, and fees) and approval speed). heloc in 2026: 7 factors that decide which one wins](/library/cash-out-refinance-vs-heloc-2026)). It is one of the biggest rating factors after your driving record, yet many drivers do not realize it is being used at all.

Here is how the system works, why insurers use it, where it is banned, and what you can do to lower your premium if your credit is holding you back.

What Is a Credit-Based Insurance Score?

A credit-based insurance score is different from the FICO score lenders use. It pulls from similar credit data — payment history, outstanding debt, length of credit history, and how much available credit you use — but weights those factors to predict insurance risk rather than loan default. Insurers have found a strong statistical link between how someone manages credit and how likely they are to file a claim, which is why the score carries so much weight.

Importantly, it does not consider your income, and checking it for insurance is a "soft pull" that does not hurt your credit.

Why Insurers Use Credit

Decades of actuarial data show that, on average, drivers with lower insurance scores file more claims and cost insurers more. From the company's perspective, credit is simply another predictor of future losses, much like your age, ZIP code, or accident history. Regulators in most states permit it as long as it is applied consistently and disclosed.

Critics argue the practice penalizes people for financial hardship rather than driving behavior, which is why a handful of states have restricted or banned it.

How Much Can Bad Credit Cost You?

The impact is significant. Nationwide studies routinely find that drivers with poor credit pay roughly 50% to 115% more than drivers with excellent credit — sometimes a larger swing than a recent at-fault accident causes. In practical terms, improving your credit tier can save hundreds or even thousands of dollars a year on the same policy.

Because each insurer weighs credit differently, two companies can quote wildly different prices to the same driver. That variation is exactly why comparison shopping matters most when your credit is less than perfect.

Which States Ban Credit-Based Insurance Scores?

Four states prohibit or heavily restrict the use of credit in setting auto insurance rates: California, Hawaii, Massachusetts, and Michigan. Washington and Maryland have added partial limits. If you live in one of these states, your rate is based on driving-related factors instead, and improving your credit will not lower your car insurance premium.

Everywhere else, credit remains a legal and common rating factor.

How to Lower Your Rate If You Have Bad Credit

You have more leverage than you might think:

• Compare multiple insurers. Because each company weights credit differently, the spread between the cheapest and most expensive quote is widest for lower-credit drivers. Shopping three to five carriers is the single fastest way to save.
• Improve your credit over time. Pay every bill on time, lower your credit-card balances, and avoid opening several new accounts at once. As your insurance score rises, ask your insurer to re-rate your policy.
• Ask about discounts. Bundling home and auto, maintaining a clean driving record, low annual mileage, and safe-driver telematics programs can offset a weaker credit tier.
• Request a re-check after a big improvement. If your credit jumps — say, after paying off a large balance — some insurers will re-run your score before renewal instead of making you wait.

The Bottom Line

In the 46 states that allow it, your credit score directly shapes what you pay for car insurance, often by 50% or more. You cannot control the fact that insurers use it, but you can control two things that matter: steadily improving your credit and comparing quotes across carriers that weigh it differently. Doing both is the most reliable path to a lower premium.

This article is educational and not financial or insurance advice; rates vary by state, insurer, and individual profile, so compare official quotes before making a decision.