Yes, your credit score directly affects your car insurance rate
Most car insurance companies use your credit score to set your premium, alongside driving history and claims record. A higher credit score typically means a lower rate; a lower score means you pay more. This practice is legal in all 50 states, though a few states limit how much insurers can use credit as a factor.
The connection between credit and insurance rates exists because insurers have found that people with lower credit scores file more claims overall. Whether that reflects actual risk or other life circumstances, the data drives their pricing. If your credit score is low, you will pay a higher premium than someone with identical driving history and a better score.
The impact varies by insurer and by state. Some companies weight credit heavily; others use it as a minor factor. Shopping around matters, because one insurer's rate for a low-credit applicant might be 50% higher than another's for the same person.
Key Takeaways
- Insurance companies use credit scores to calculate premiums in most states, so a lower score raises your rate even with a clean driving record.
- The weight given to credit varies by insurer, which means comparing quotes from multiple companies can save you money if your score is low.
- A few states cap how much credit can affect your rate, and some prohibit its use entirely for certain types of coverage.
- Improving your credit score over time will lower your insurance costs, though the change takes months to show up in new quotes.
- Bundling policies, raising your deductible, or paying in full upfront can reduce your rate regardless of credit score.
Which states limit or ban credit-based insurance scores
California, Hawaii, and Massachusetts prohibit insurers from using credit scores to set rates. If you live in one of these states, your credit score will not affect your premium at all.
Maryland, Minnesota, Missouri, and Oregon allow credit scoring but cap how much it can raise your rate. The limits vary by state—some allow a 10% increase, others allow more. Check your state's insurance commissioner website for the exact rule in your state.
In all other states, insurers can use credit as a pricing factor with no legal cap. That does not mean every company uses it the same way. A company licensed in your state might weight credit lightly or heavily depending on its own underwriting model.
How much your credit score can raise your insurance rate
The difference between a high credit score and a low one can range from 20% to 100% of your base premium, depending on the insurer and your state. A person with a 750+ credit score might pay $1,200 a year, while someone with a 600 score could pay $1,800 to $2,400 for identical coverage with the same company.
These numbers vary widely. Some insurers are more sensitive to credit than others. A company that focuses on high-risk drivers might charge less of a premium bump for low credit; a company targeting low-risk customers might charge more. This is why getting quotes from at least three insurers is worth your time if your credit is below 650.
Your credit score is not the only factor in your rate. A recent accident or speeding ticket will raise your premium more than a low credit score in most cases. But credit acts as a multiplier—it affects the base rate that everything else is calculated from.
What counts as your insurance credit score
Insurance companies do not use your standard FICO credit score directly. Instead, they use an insurance credit score, which is a separate number calculated by the same bureaus (Equifax, Experian, TransUnion) but weighted differently. Insurance scores emphasize payment history and outstanding debt; they ignore factors like length of credit history that matter more for lending.
You cannot see your insurance credit score the way you can see your FICO score. The bureaus do not publish it. But if you improve the underlying factors—paying bills on time, lowering credit card balances, not opening new accounts—your insurance score will improve along with your FICO score.
Hard inquiries (when a company checks your credit to make a lending decision) can lower your FICO score slightly, but insurance companies checking your score for a quote does not count as a hard inquiry and does not hurt your credit.
How to lower your insurance rate if your credit is low
If your credit score is low, you have several options beyond waiting for it to improve. Raising your deductible from $500 to $1,000 typically lowers your premium by 10% to 25%, depending on the insurer. You keep more of the savings if you do not file a claim, but you pay more out of pocket if you do.
Paying your premium in full upfront instead of monthly often saves 5% to 10%. Some insurers also offer discounts for bundling home and auto insurance, completing a defensive driving course, or maintaining continuous coverage without lapses. These discounts apply regardless of credit score.
Shopping every six months is worth doing. As your credit improves, your insurance score improves with it, and new quotes will reflect that. You might also find a different insurer that weights credit less heavily. Some companies specialize in drivers with lower credit and charge less of a premium bump than mainstream insurers.
What happens if you have no credit history
If you have never borrowed money or opened a credit card, you have no credit score at all. Some insurers treat no credit score the same as a low score and charge a higher rate. Others have a separate category for no-credit applicants and charge less of a premium bump.
If you are in this situation, get quotes from multiple companies. The variation is often larger for no-credit applicants than for people with low scores. You might find one insurer that charges standard rates for no-credit customers while another charges 30% more.
How long it takes for credit improvements to show up in your insurance rate
Insurance companies typically check your credit score when you first buy a policy and again when you renew. If you improve your credit between now and your renewal date, your next quote will reflect the improvement. That usually means waiting three to six months.
If you are in the middle of your policy term and your credit has improved significantly, you can call your insurer and ask if they will re-quote you early. Some will; most will not. Your best option is to get quotes from other companies, which will pull your current credit score and may offer a better rate based on your improved score.
Frequently Asked Questions
Will checking my credit score for insurance hurt my credit?
No. When an insurance company checks your credit for a quote or rate calculation, it is a soft inquiry that does not appear on your credit report and does not lower your score. Only hard inquiries (from lenders when you apply for credit) affect your score.
Can an insurance company deny me coverage because of my credit score?
No. Credit score affects the price you pay, not whether you can buy insurance. An insurer can deny you based on driving record or claims history, but not credit alone. If one company declines you, others will still offer coverage.
Does paying my insurance premium late hurt my credit?
Only if your insurer reports the late payment to credit bureaus, which most do not unless the account goes to collections. However, paying late can result in your policy being cancelled, which creates other problems. Pay on time to avoid that risk.
If I pay off my credit card debt, how soon will my insurance rate drop?
Your credit score will improve within one to two billing cycles after you pay down debt. Your insurance score will improve along with it, but your rate will not change until your next renewal or until you get a new quote from a different insurer.
Do all insurance companies use credit scores the same way?
No. Some companies weight credit heavily in their pricing model; others use it as a minor factor. This is why two insurers can quote you very different rates for the same coverage. Always get quotes from at least three companies to find the best price for your situation.