When most people think about their credit score, they associate it with loans, credit cards, or mortgage approvals. But did you know that your credit score can also impact how much you pay for auto insurance in the U.S.?
In 2025, credit-based insurance scoring continues to be a major factor for insurers when calculating your premium—even if you’ve never missed a payment or had an accident. Understanding how and why your credit score affects your car insurance rate can help you take control of your costs.
Why Do Insurance Companies Use Credit Scores?
Auto insurance companies use a version of your credit score—often called a credit-based insurance score—to assess risk. Studies show a correlation between lower credit scores and higher claim rates. While this doesn’t mean you’re a bad driver, insurers believe that people with lower scores are statistically more likely to file claims.
That means even with a clean driving record, a low credit score can still raise your premium.
What Credit Factors Affect Your Rate?
Insurers typically don’t look at your full credit report, but they do analyze certain elements, including:
- Payment history: Late payments on loans, credit cards, or bills
- Credit utilization: How much of your available credit you’re using
- Length of credit history: Older, more established accounts can help
- Types of credit used: A mix of revolving (credit cards) and installment (loans) accounts
- Recent inquiries: Multiple hard pulls in a short period may hurt your score
Each insurer weighs these factors differently, and some states restrict how much your credit score can influence your premium.
States That Limit or Ban Credit-Based Pricing
As of 2025, a few states have banned or restricted the use of credit scores in setting auto insurance rates, including:
- California
- Hawaii
- Massachusetts
- Michigan (limitations)
If you live in one of these states, your credit score may not impact your premium—or may do so to a lesser extent.
How Much Can It Affect Your Premium?
The difference between a good and poor credit score can be dramatic. In some states, drivers with poor credit may pay 50% to 100% more than those with excellent credit—even with identical driving histories.
For example:
- Excellent credit (750+): $1,200/year
- Poor credit (below 600): $2,000+/year
This shows how important credit health is—not just for borrowing, but also for everyday expenses like insurance.
How to Lower Your Premium Through Credit
Want to pay less? Start by improving your credit score:
- Pay bills on time
- Keep credit utilization low
- Avoid opening too many new accounts at once
- Check your credit report for errors
Also, regularly compare insurance quotes. Some companies weigh credit scores more heavily than others.
Final Thoughts
Your credit score is more than just a financial number—it’s a factor that can directly impact your car insurance premium. By staying on top of your credit health and shopping around, you can keep your rates down and your budget on track.
