Does Credit Score Affect Your Car Insurance Rates?

Last Updated on December 28, 2025

Your credit can have a real impact on your car insurance premium. In most states, insurers use information from your credit report to help predict risk and set rates—so drivers with strong credit often pay less than drivers with poor (or thin) credit, all else equal.

But “credit score and car insurance” is more complicated than it sounds. Insurers usually don’t use the exact same score a bank uses, state rules vary, and your driving record and coverage choices still matter a lot. Here’s how it works and what to do if your credit isn’t great.

Key Takeaways

• In most states, insurers can use a credit-based insurance score (built from your credit report data) as one factor to set car insurance rates.
• The impact can be substantial—credit can change premiums by hundreds (or more) per year depending on your state, insurer, and overall profile.
• Shopping for quotes is usually the best way to lower costs with bad credit because different insurers weigh credit differently.
• Improving credit over time (on-time payments, lower balances, fewer negative marks) can help you qualify for better pricing tiers at renewal.

Yes, Credit Can Affect Car Insurance Rates

In states where it’s allowed, many insurers factor credit information into both pricing (rating) and eligibility (underwriting). This usually happens through a “soft” credit inquiry or a credit-based model built from your credit report data. If you’re looking for companies that don’t use credit in certain situations, start here: no credit check auto insurance quotes.

Why does credit matter? Insurers generally argue that people with stronger credit profiles, as a group, tend to file fewer or lower-cost claims—so credit becomes one of many inputs used to estimate expected losses. Critics argue the practice can be unfair and may disproportionately affect some consumers. Both perspectives are part of why the rules differ by state.

Credit Score vs. Credit-Based Insurance Score

Insurers typically don’t use the exact same credit score used for loans or credit cards. Instead, many use a credit-based insurance score, which is built from your credit report data but designed to predict insurance risk rather than lending risk.

If you want a deeper explanation of what it is (and what “good” looks like), see: What Is My Car Insurance Score?

While the formulas vary by company and state, credit-based insurance scores often consider patterns like:

• Payment history: on-time payments vs. late payments, collections, and serious delinquencies
• Credit utilization: how much of your available revolving credit you’re using
• Length of credit history: how long accounts have been open
• New credit activity: how often you open new accounts
• Negative events: charge-offs, bankruptcies, and other major derogatory marks

States Where Credit Can’t Be Used (or Is Limited)

Credit-based insurance scoring is regulated at the state level, and the rules aren’t the same everywhere. A few states generally prohibit using credit scoring for auto insurance pricing (and some limit it in other ways). Several other states restrict how credit can be used—for example, limiting when it can affect underwriting decisions.

Because laws and regulations can change, the most reliable move is to check your state Department of Insurance website (or ask an agent to confirm what applies where you live).

How Much Can Bad Credit Raise Your Car Insurance Premium?

There’s no single answer, but in many states credit can be one of the biggest pricing factors—sometimes changing premiums by hundreds (or even thousands) per year. The impact depends on your state, the insurer, your overall profile, and how heavily the company weights credit compared to other factors.

Also, “bad credit” isn’t the only issue. If you have no credit or a “thin file,” some insurers may treat you as higher risk simply because there’s less data to score—though many states have consumer protections that limit how insurers can treat applicants with limited credit history.

Does Getting Car Insurance Quotes Hurt Your Credit?

Shopping for car insurance is generally not the same as applying for a loan. In most cases, getting quotes does not lower your credit score. If you want the details, here’s a full breakdown: Does getting a car insurance quote affect your credit score?

Other Factors That Affect Your Rates

Even in states where credit is used, it’s still just one factor. Insurers also commonly rate based on things like:

• Driving record: accidents, tickets, and violations can outweigh credit in many situations (see how driving history affects insurance rates).
• Coverage choices: higher limits and lower deductibles cost more (use this guide when choosing auto insurance limits).
• Vehicle factors: repair costs, safety features, theft rates, and overall value
• Location and mileage: where you park and how much you drive
• Insurance history: lapses in coverage, prior claims, and prior carrier history

Some “non-driving” factors can also show up in pricing in certain states, but they’re restricted or prohibited in others. So if you move, don’t assume the same pricing rules apply in your new state.

How to Get Cheaper Car Insurance with Bad Credit

You can absolutely find affordable coverage with less-than-perfect credit—you just need to be more strategic. Here are practical ways to lower your cost:

1. Shop multiple carriers. Credit is weighted differently by different insurers, so comparing quotes matters more when your credit is poor.
2. Max out discounts you qualify for. Start with the most common savings opportunities: best auto insurance discounts.
3. Consider bundling if you have another policy. Bundles can be meaningful (and sometimes offset a credit surcharge): best companies to bundle home and auto insurance.
4. Adjust deductibles and coverages carefully. A higher deductible can lower premium, but only choose a deductible you can realistically pay in an emergency.
5. Ask about alternative rating programs. Some insurers offer usage-based/telematics programs where driving behavior can play a bigger role than traditional rating variables.
6. Keep coverage continuous. Lapses often raise rates—sometimes more than people expect.

If an insurer won’t write you a policy (or pricing is extremely high), you still have options. Some drivers may need to use a state-backed plan temporarily: how to get cheap assigned risk auto insurance. It’s not ideal, but it can keep you legal while you improve your profile and shop again later.

It’s also worth understanding how underwriting decisions work in general (and why a carrier might decline): can car insurance deny coverage to me?

How to Improve Your Credit and Potentially Lower Insurance Costs

Improving your credit won’t always cut your premium immediately, but it can help over time—especially at renewal. Start with actions that typically move the needle:

• Pay every bill on time. Late payments can hurt quickly and take time to recover from. (If you’re trying to avoid late payments on your policy itself, see what happens if your car insurance payment is late.)
• Lower credit card balances. High utilization is a common drag on scores.
• Dispute errors. Incorrect late payments or collections can cost you points and, potentially, higher premiums.
• Be cautious with new credit. A lot of new accounts in a short time can lower scores.
• Give it time. As negative items age and your history improves, scoring models may treat you more favorably.

Is It Fair That Insurers Use Credit?

This is one of the most debated topics in personal auto insurance. Supporters say credit-based insurance scoring improves accuracy and helps align price with expected losses. Critics argue it can punish people for financial hardship and can create affordability problems even for safe drivers.

Regardless of which side you’re on, one thing is clear: credit use is heavily regulated, and state rules continue to evolve. If you feel your premium doesn’t match your driving risk, it’s worth comparing carriers—especially if your rate feels high despite having no accidents.

FAQs on Credit Score and Car Insurance

Final Word on Credit Score and Car Insurance

In many states, credit is a meaningful part of how car insurance is priced—but it’s not the only factor. If your credit isn’t great, you can still find competitive coverage by shopping multiple carriers, stacking discounts, and keeping your policy active without lapses. Over the long run, improving your credit profile can also help you qualify for better pricing tiers.