Why Your Credit Score Affects Your Auto Insurance Quote – And How to Fix It
Why Your Credit Score Affects Your Auto Insurance Quote – And How to Fix It
When you're shopping for car insurance, your driving record and age aren't the only factors insurers consider.
One often-overlooked but powerful influencer is your credit score.
Yes, the same number that affects your ability to get a loan or a credit card also has a big say in how much you pay for auto insurance.
📌 Table of Contents
- Why Credit Score Matters to Insurers
- How It Impacts Your Insurance Rates
- How to Improve Your Credit Score
- States That Restrict Credit Score Usage
- Final Thoughts
Why Credit Score Matters to Insurers
Insurance companies use something called a “credit-based insurance score.”
It’s similar to your regular credit score but specifically designed to predict how likely you are to file a claim.
According to a study by the Federal Trade Commission, there's a correlation between credit-based insurance scores and risk levels.
In simple terms, people with lower credit scores tend to file more claims and cost insurers more money.
Because of that, many insurers believe using credit data helps them set fairer premiums across their customer base.
They argue it allows them to offer lower rates to less risky drivers.
How It Impacts Your Insurance Rates
If your credit score falls in the "poor" or even "fair" range, you could be paying hundreds more per year for the same coverage compared to someone with "excellent" credit.
For example, according to WalletHub, drivers with no credit or poor credit can pay as much as 61% more in premiums than those with excellent credit.
That means if your base premium is $1,200, you might pay close to $2,000 with poor credit.
Even worse, many people don’t even know this is happening.
Your insurer may not explicitly tell you your rate is based on your credit score, but it's quietly influencing what you pay every month.
How to Improve Your Credit Score
Luckily, there are actionable steps you can take to boost your credit score — and potentially lower your auto insurance premiums.
1. Pay Your Bills on Time: Payment history is the most important factor in your credit score.
Even one missed payment can have a big negative impact.
2. Reduce Credit Utilization: Try to use less than 30% of your available credit across all cards.
This shows you’re managing credit responsibly.
3. Check Your Credit Report: Errors happen.
You can request a free copy of your report from all three major bureaus once a year at
4. Avoid Opening Too Many New Accounts: Each new application can result in a hard inquiry, which may lower your score.
5. Build a Longer Credit History: Keeping older accounts open can improve the length of your credit history, which is a positive scoring factor.
States That Restrict Credit Score Usage
Not all states allow insurers to use credit scores when determining premiums.
California, Hawaii, and Massachusetts prohibit the use of credit-based insurance scores altogether.
Other states may limit how much weight can be given to your credit score.
If you live in one of these states, you may not need to worry about credit affecting your insurance rate — but always check with your provider to be sure.
Final Thoughts
Your credit score has more influence over your financial life than you might think.
Not only does it affect your ability to borrow, but it can also significantly impact your car insurance premiums.
Understanding how your score is used — and taking steps to improve it — can help you save money in the long run.
Don’t let a low score steer you into high premiums.
Take control, stay informed, and shop around to get the best deal.
For more info on how to improve your credit score and navigate your options, check out:
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