How Your Credit Score Affects Car Insurance Rates

Most drivers know that their driving record and the car they drive affect their insurance rates. What surprises many people is that their credit score — or more precisely, their credit-based insurance score — can have just as much impact on their premium as their accident history. Depending on your credit, you could be paying hundreds or even thousands more per year than a driver with the same record and vehicle.

What Is a Credit-Based Insurance Score?

A credit-based insurance score isn't your regular FICO score, but it's derived from much of the same data. Insurers use information from your credit report — payment history, outstanding debt, length of credit history, and types of credit used — to generate a score that predicts how likely you are to file a claim.

Studies by the insurance industry (and independently by the FTC) have found a statistical correlation between credit history and claim frequency. People with lower credit scores tend to file more claims on average. Insurers argue this justifies using credit as a rating factor, though consumer advocates have long questioned whether the practice is fair.

Key differences between your credit-based insurance score and your regular credit score:

• Different models. Insurers use models from LexisNexis and TransUnion designed specifically for insurance, not the FICO or VantageScore models used for lending.
• Different weighting. Insurance scores weigh payment history and outstanding debt heavily, but don't consider income or employment.
• No hard inquiry. Checking your insurance score doesn't affect your credit score — it's a soft pull.

How Much Does Credit Actually Affect Your Premium?

The impact is substantial. Multiple studies and rate analyses show:

• Drivers with poor credit pay an average of 40–115% more for car insurance than drivers with excellent credit — depending on the state and insurer.
• In dollar terms, that can mean a difference of $1,000–$3,000+ per year for the same coverage on the same vehicle.
• In some states, the difference between "excellent" and "poor" credit tiers is larger than the difference between a clean driving record and one with an at-fault accident.

To put it starkly: a driver with perfect credit and a recent accident may pay less than a driver with poor credit and a clean record. The weight insurers place on credit is that significant.

Which States Ban or Limit the Practice?

Not every state allows insurers to use credit scores in auto insurance pricing:

• California — Banned entirely. Insurers cannot use credit in auto insurance rating.
• Hawaii — Banned for auto insurance.
• Massachusetts — Banned for auto insurance.
• Michigan — Restricted use; banned for auto after recent reform.
• Washington — Temporarily banned, with ongoing legislative debate.
• Oregon — Banned for auto and home insurance.
• Maryland — Banned for auto insurance.

In all other states, insurers can and do use credit-based insurance scores as a rating factor. Some states require that credit can't be the sole reason for denying coverage or non-renewal, but it can still heavily influence your premium.

How to Improve Your Insurance Score

Since credit-based insurance scores draw from your credit report, improving your credit generally improves your insurance score:

1. Pay bills on time. Payment history is the single biggest factor. Even one late payment can affect your score.
2. Reduce outstanding debt. High credit utilization (using a large percentage of your available credit) hurts your score.
3. Don't close old accounts. Length of credit history matters. Keep older accounts open even if you don't use them actively.
4. Limit new credit applications. Multiple hard inquiries in a short period can lower your credit score, which indirectly affects your insurance score.
5. Check your credit report for errors. Dispute any inaccuracies with the credit bureaus. An erroneous collection or late payment could be inflating your premium.

What to Do If You Have Poor Credit

If your credit isn't great and you need car insurance now, you still have options:

• Shop aggressively. Different insurers weigh credit differently. Some are more forgiving than others, and rate differences can be dramatic.
• Ask about discount programs. Some carriers offer accident-free or defensive driving discounts that can partially offset the credit surcharge.
• Consider usage-based insurance. Programs that track your actual driving behavior (mileage, braking, speed) can reward safe drivers regardless of credit.
• Raise your deductible. Increasing your deductible from $500 to $1,000 can lower your premium by 10–15%.
• Bundle policies. Combining auto with renters or homeowners insurance often yields multi-policy discounts.

How Truvo Helps Drivers at Every Credit Level

Because Truvo is an independent agency comparing rates from multiple carriers, we can identify which insurers offer the most competitive pricing for your specific credit profile. Two drivers with identical records and vehicles can get wildly different quotes depending on the carrier — and credit is often the variable that creates those gaps. We help you find the best rate regardless of where your credit stands today.

Your Credit Score Matters More Than You Think

If you've been paying more for car insurance than you think you should, your credit may be the hidden factor. The good news: you can improve it over time, and you can shop smarter right now. Get a quote from Truvo to see how much you could save by comparing carriers that weight credit differently.