Most people know their credit score affects their ability to get loans and credit cards — but it also plays a major role in your car insurance premium. In many states, insurers use credit-based insurance scores to help determine how much you’ll pay.
This may come as a surprise, especially if you have a clean driving record. But for insurers, your credit behavior is a key signal of your risk profile. In this article, we’ll break down the connection between credit score and car insurance, explain how it impacts your rates, and show you what you can do to take control.
Why Credit Score Affects Car Insurance Rates
Car insurance companies don’t look at your traditional credit score — like FICO or VantageScore — but rather a credit-based insurance score, which is similar. It’s used to help predict how likely you are to file a claim.
According to the Consumer Reports study, people with poor credit can pay hundreds more per year than those with excellent credit — even when all other risk factors are identical.
Insurers consider factors like:
- Payment history
- Credit utilization
- Length of credit history
- Total debt
Why does this matter? Research has shown that drivers with lower credit scores are statistically more likely to file claims, so insurers treat them as higher risk — even if they’ve never been in an accident.
How Much Does Credit Score Impact Insurance Rates?
The impact of your credit score on car insurance can be substantial. A driver with excellent credit may pay 30% to 50% less than someone with poor credit, depending on the insurer.
Let’s say you’re a driver with a clean record and average mileage:
- With excellent credit, your annual premium might be $1,200.
- With poor credit, that premium could jump to $1,800–$2,400 or more.
Some states — including California, Massachusetts, and Hawaii — have banned the use of credit scores in setting car insurance rates. However, in the majority of the U.S., it’s still fair game.
How to Improve Your Credit Score (and Lower Your Insurance)
Improving your credit score not only helps you qualify for better loans, but it can also reduce your auto insurance premium over time.
Here are steps you can take today:
- Pay your bills on time – Payment history is a major factor.
- Reduce your credit card balances – Keep utilization below 30%.
- Limit hard inquiries – Don’t apply for unnecessary credit.
- Dispute inaccuracies – Errors on your report can drag down your score.
Most of these steps take time, but some — like paying down a high balance — can show results within a month or two.
What If Your State Doesn’t Allow Credit Use?
If you live in a state where insurers aren’t allowed to use credit scores to determine rates, you’re in luck. You’ll be evaluated on more direct risk factors like driving history, age, location, and vehicle type.
Still, improving your credit is worthwhile for other financial benefits, including lower interest rates on car loans, credit cards, and even mortgages.
Other Factors That Affect Car Insurance Rates
Your credit score is just one piece of the puzzle. Insurers also look at:
- Your driving record and claims history
- Your age and gender
- Where you live (urban ZIP codes tend to cost more)
- The type of vehicle you drive
- Annual mileage
- Whether the car is financed or owned outright
Improving your credit can give you a strong advantage, but pairing it with good driving habits and smart policy decisions will have the biggest impact on your premium.
Final Thoughts
Your credit score is more than just a financial number — it can significantly affect how much you pay for car insurance. If you’re trying to lower your premium, understanding this connection is a powerful step.
Start by reviewing your credit report, making consistent on-time payments, and keeping your balances low. Even a modest improvement in your credit score could lead to noticeable savings on your car insurance.
👉 Review your credit today and get quotes from insurers who offer the best rates based on your risk profile.