Does Your Credit Score Affect Car Insurance?

In 46 of 50 states, your credit score meaningfully affects your auto insurance premium. Drivers with poor credit can pay 50-100% more than drivers with excellent credit for identical coverage. This surprises many people — your driving record and your credit score feel unrelated. Here is why insurers use credit data and what it means for your rate.

Why insurers use credit scores

Insurance companies use credit-based insurance scores — not identical to your FICO score but heavily correlated — because actuarial research shows a strong relationship between credit behavior and claims frequency. Drivers with poor credit scores file claims more frequently, and those claims cost more on average.

The correlation may reflect underlying factors: financial stress, impulsiveness in decision-making, or willingness to maintain and repair a vehicle. Whatever the cause, the data relationship is consistent enough that regulators in 46 states permit its use.

States that prohibit credit-based pricing

California, Hawaii, Massachusetts, and Michigan prohibit insurers from using credit scores in auto insurance pricing. If you live in one of these states, your credit history has no impact on your auto insurance rate.

Several other states limit how much weight insurers can give to credit factors, though they do not prohibit it entirely. Maryland, for example, prohibits using credit as the sole reason for raising rates.

How much does credit score affect your rate?

The impact is substantial. Moving from excellent credit (750+) to poor credit (below 580) can increase your auto insurance premium by 50-100% depending on the state and insurer. Moving from good credit to excellent credit can save $200-$500/year.

Not all insurers weight credit equally. GEICO tends to use it heavily; State Farm somewhat less so. Shopping multiple quotes is especially valuable if you are working on improving your credit.

Improving your credit to lower your rate

Credit-based insurance scores update at policy renewal. If you have improved your credit significantly in the past year, ask your insurer to re-run your score at renewal — or get new quotes from competitors. Paying down credit card balances below 30% utilization, eliminating late payments, and avoiding new hard inquiries all improve your credit-based insurance score over 6-12 months.