How your credit affects your car insurance
In most states, your credit history quietly shapes what you pay for car insurance — here's how it works and how to improve your rate.
Key takeaways
- Most states let insurers use a credit-based score to price car insurance.
- It's banned in a few states (e.g., CA, HI, MA, MI).
- Improving your credit can lower your premium — and shopping helps, since insurers weigh credit differently.
It surprises many people, but in most states insurers use a 'credit-based insurance score' to help set your car insurance rate. It's not the same as your regular credit score, but it draws on similar information — your payment history, debt levels, and length of credit history. Statistically, insurers have found it predicts claims, so better credit often means a lower premium.
A few important points:
- This practice is banned or restricted in some states, including California, Hawaii, Massachusetts, and Michigan, where insurers can't use credit to set auto rates.
- Where it is used, poor credit can raise your premium substantially — sometimes more than a minor traffic ticket.
- Improving your credit over time can lower your insurance cost, not just your loan rates.
What helps: paying every bill on time, lowering your credit-card balances, and avoiding unnecessary new credit. As your credit improves, ask your insurer to re-rate your policy, or shop around — some companies weigh credit more heavily than others, so a driver with rebuilding credit may find a much better deal elsewhere.
What this is
Why it matters
What you can do next
Related FAQs
Common questions about this topic, answered simply.
Is a credit-based insurance score the same as my credit score?
No, but it's related. It's a separate score insurers calculate from similar credit information — payment history, balances, and credit age — specifically to predict insurance claims. Improving your regular credit usually improves it too.
How much can credit affect my rate?
In states that allow it, the difference between poor and excellent credit can be large — sometimes hundreds of dollars a year, occasionally more than a speeding ticket. That's why rebuilding credit is worth it for insurance, not just loans.
Can I ask my insurer to re-check my credit?
Yes. As your credit improves, ask your insurer to re-rate your policy, or get fresh quotes. Some companies rely on credit more than others, so shopping can reveal a much better rate for improving credit.
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