When you think of credit scores, you probably associate them with getting a loan or a credit card. But did you know your credit score can also impact how much you pay for auto insurance?
In most U.S. states, insurance companies use credit-based insurance scores to help determine your premium. Even if you have a clean driving record, a low credit score could still lead to higher rates. Let’s explore why this happens—and more importantly, how you can fix it.
Why Do Insurers Use Credit Scores?
Insurance companies have one goal: to predict risk. Over time, studies have shown a strong correlation between credit scores and the likelihood of filing insurance claims. Drivers with lower credit scores are statistically more likely to file claims and, in some cases, file for higher amounts.
As a result, many insurers adjust your rate based on a credit-based insurance score—a number derived from elements of your credit report, like:
- Payment history
- Credit utilization
- Length of credit history
- Types of credit accounts
- Recent credit inquiries
It’s not the exact same score lenders see, but it uses similar data.
States Where This Doesn’t Apply
Not all states allow the use of credit scores in auto insurance pricing. As of 2025, California, Hawaii, and Massachusetts have banned this practice. In other states, insurers can legally factor in your credit when setting premiums.
How a Low Score Impacts Your Rate
The difference in cost can be significant. A driver with poor credit may pay hundreds more per year than a driver with excellent credit, even if everything else—like age, driving history, and location—is the same.
If you’re already paying high premiums, your credit score could be a hidden reason.
How to Improve Your Credit—and Your Insurance Rate
The good news? Improving your credit can lower your insurance rate over time. Here’s how to get started:
1. Check Your Credit Reports
Request your free credit report at AnnualCreditReport.com. Look for errors or outdated information that may be hurting your score.
2. Pay Bills on Time
Your payment history makes up a large portion of your credit score. Set up reminders or automatic payments to avoid missing due dates.
3. Reduce Credit Card Balances
High balances can damage your score. Aim to keep your credit utilization below 30% of your available credit limit.
4. Avoid New Credit Applications
Every time you apply for new credit, it creates a hard inquiry that can temporarily lower your score.
5. Be Patient and Consistent
Credit repair doesn’t happen overnight, but consistent good habits can lead to long-term savings—not just on loans, but also on insurance.
Final Thoughts
Your credit score affects more than just your borrowing power—it can also impact your auto insurance premiums. While this may seem unfair, it’s a reality in most U.S. states. The silver lining? You have the power to improve your credit and unlock lower rates in the future.
Start by checking your credit, staying on top of payments, and shopping around for insurers that reward good financial habits. A better score can mean better protection—and more money in your pocket.
