How Your Credit Score Affects Car Insurance Rates

Most drivers know that tickets and accidents raise their rates. Fewer realize that in the majority of states, your credit history can affect your car insurance premium just as much — sometimes more.

What Is a Credit-Based Insurance Score

Insurers use a credit-based insurance score, which is related to but not identical to the credit score lenders use. It weighs factors like payment history, outstanding debt, and length of credit history to predict how likely you are to file a claim.

Statistically, insurers have found a correlation between these scores and claims, which is why they are allowed to use them in pricing in most states.

Where It Applies — and Where It Doesn't

A few states restrict or ban the use of credit in auto insurance pricing, including California, Hawaii, Massachusetts, and Michigan. Everywhere else, your score can meaningfully change your premium.

Two drivers with identical records can pay very different rates based on credit alone, which is one more reason quotes vary so much between carriers.

How to Improve Your Position

Pay bills on time, keep credit card balances low relative to your limits, and avoid opening several new accounts at once. Check your credit reports for errors and dispute anything inaccurate.

Improvements take time to show up, but they can lead to lower premiums at your next renewal.

The Fastest Way to Save

Because every insurer weighs credit differently, the driver who shops around usually wins. Comparing several quotes for the same coverage is the quickest way to find the carrier that views your profile most favorably.