Does Your Credit Score Affect Car Insurance? (Yes — Here's How Much)

Yes. In 47 out of 50 US states, car insurance companies use a version of your credit score — called a "credit-based insurance score" — to help set your premium. A poor credit score can double or even triple your rates compared to someone with excellent credit, even if your driving record is spotless.

Only California, Hawaii, and Massachusetts have banned the practice entirely. Michigan passed a partial ban in 2019. Washington state banned it temporarily during COVID but has since allowed it again. Everywhere else, your credit is a factor.

The numbers are stark. According to data from the National Association of Insurance Commissioners and multiple independent analyses:

That's not a typo. Someone with poor credit can pay $200 more per month than someone with excellent credit for the exact same coverage on the exact same car. Over 5 years, that's $12,000 in extra premiums — money that could have gone toward paying off debt, building credit, or investing.

Insurance companies don't care whether you pay your Visa bill on time because they're judging your character. They care because decades of actuarial data show a statistical correlation between credit behavior and insurance claim frequency.

The logic (simplified):

• People who manage credit responsibly tend to file fewer claims
• People with missed payments, collections, and high utilization tend to file more claims
• The correlation holds even after controlling for age, driving record, and location

Is this fair? That's debatable — and consumer advocacy groups have fought it for years. Critics argue it penalizes people who had medical emergencies, divorces, or job losses. Supporters argue it's no different from any other statistical risk factor. But fair or not, it's legal in 47 states, and knowing it exists is the first step to doing something about it.

It's not your regular FICO score. Insurance companies use a specialized scoring model — most commonly the LexisNexis Attract score or the FICO Insurance Score — that weighs credit factors differently. Payment history matters even MORE for insurance scoring than for regular credit scoring. A single missed payment can hit your insurance score harder than your FICO.

What's NOT in your insurance score:

• Your income or employment status
• Your race, religion, or national origin
• Your marital status (in most states)
• Whether you've been denied credit
• Rate-shopping inquiries (protected)

In many cases, yes. Multiple studies have found that the premium increase from poor credit is larger than the increase from a moving violation. A 2021 analysis by The Zebra found:

• One speeding ticket: +$354/year average increase
• One at-fault accident: +$1,010/year
• Poor credit (vs excellent): +$1,380/year

Your credit score is, statistically, a bigger factor in your premium than a single accident.

1. Know your score (it's free)

Check your credit score through your bank or a free credit monitoring service like Credit Karma or WalletHub. You can't fix what you can't see.

2. Fix errors on your report

Up to 25% of credit reports contain errors that could be dragging your score down. Dispute any inaccuracies directly with the bureaus, or use a credit repair service if you need help.

3. Build credit deliberately

If your score is below 670, credit builder loans or secured credit cards can add 50–100 points over 6–12 months with consistent on-time payments.

4. Shop your insurance every renewal

Insurance companies pull your credit at each renewal. If your score has improved, shop around — your current insurer may not automatically lower your rate, but a competitor will price you at your current score.

5. Ask about credit-blind discounts

Some insurers offer "credit-blind" pricing in states where it's not mandatory. USAA, Erie, and some regional mutuals have been known to offer alternatives.

If you live in a heavy-use state and have poor credit, improving your score by even 50 points could save you $500–$1,000/year.