How Credit Score Affects Your Auto Insurance Quote – And What You Can Do About It

 

How Credit Score Affects Your Auto Insurance Quote – And What You Can Do About It

For many drivers, auto insurance quotes feel like a mystery box — especially when your driving record is clean, but the premiums are still high.

One factor that might be influencing your rate more than you realize is your credit score.

Yes, your credit history can have a significant effect on how much you pay for auto insurance — and in most U.S. states, it’s perfectly legal for insurers to consider it.

This post breaks down how and why your credit impacts your insurance quote and, more importantly, what you can do about it.

🔍 Table of Contents

Why Do Insurers Use Your Credit Score?

Insurance companies argue that there’s a correlation between credit history and the likelihood of filing a claim.

In their view, drivers with lower credit scores tend to file more claims or cost more in claims over time.

This leads them to use credit-based insurance scores, a variation of your regular credit score, to assess risk.

These scores consider payment history, debt levels, length of credit history, and types of credit — but they exclude personal information like income or race.

According to the Insurance Information Institute, drivers with poor credit can pay up to 61% more than those with excellent credit, even with a clean driving record.

How Much Can Credit Score Affect Your Rate?

The impact is surprisingly large.

In some states, the difference in premiums between someone with poor credit and excellent credit can be over $1,000 per year.

For example, a 2023 study by WalletHub found that drivers with poor credit pay 114% more for car insurance on average than those with excellent credit.

This means your financial habits outside of driving can cost you more than a speeding ticket.

Even just moving from a “good” score to a “fair” score can bump your rate significantly.

Where Is It Legal to Use Credit for Insurance?

Not every state allows insurers to use your credit information when setting rates.

As of 2025, the states that have restricted or banned the practice include California, Hawaii, Massachusetts, and Michigan.

In California, for instance, it’s illegal for insurers to use credit information when determining auto insurance premiums.

Meanwhile, states like Texas, Florida, and Georgia allow full use of credit scores in rate setting.

If you live in a state where it’s banned, consider yourself lucky — your credit won’t impact your quote.

How to Improve Your Credit Score for Better Rates

Improving your credit score doesn’t just help you get better loans — it can lower your car insurance premium too.

Here are steps you can take:

  • Always pay your bills on time — payment history has the biggest impact on your credit.

  • Reduce your credit card balances to lower your credit utilization ratio.

  • Don’t close old credit accounts unless necessary; longer credit history helps.

  • Limit hard inquiries by spacing out credit applications.

  • Regularly check your credit report for errors via AnnualCreditReport.com.

It may take a few months, but a higher score can significantly lower your insurance costs.

Alternatives and Insurers Who Don’t Use Credit

If you’re frustrated by credit-based pricing, consider shopping around for insurers who don’t use it at all.

Some companies — like Root Insurance and MetroMile — use telematics or driving behavior instead of credit scores.

These companies rely on smartphone tracking or car sensors to assess how safely you actually drive.

It’s a growing trend that offers fairer pricing for responsible drivers with less-than-perfect credit.

You can learn more and compare non-credit-based insurers at NerdWallet’s comparison tool:

Final Thoughts

Your credit score doesn’t just affect your ability to get a loan — it also shapes your monthly car insurance bill.

Understanding this connection gives you power.

By improving your credit and shopping for insurers that value actual driving habits over financial history, you can take back control of your premium.

Don’t let your past define your rate — with the right steps, your future behind the wheel can be a lot more affordable.

Keywords: credit score, auto insurance, insurance quote, insurance premiums, improve credit