How Your Credit Score Can Raise or Lower Your Car Insurance Premium

When it comes to car insurance, most people focus on driving history, location, or vehicle type—but your credit score may be playing a bigger role than you think. In many U.S. states, insurers legally use your credit-based insurance score to help determine how much you’ll pay. If you’re wondering why, and how to avoid paying more, keep reading.

How Insurers Use Your Credit Score

Most insurance companies (except in California, Massachusetts, and Hawaii, where it’s banned) believe credit score is a reliable predictor of financial responsibility. Statistically, people with higher credit scores file fewer claims.

What Is a Credit-Based Insurance Score?

It’s not your FICO score, but a variation of it that includes:

Payment history
Credit utilization
Length of credit history
Recent inquiries
Types of credit used

How a Low Score Can Cost You

Drivers with poor credit can pay up to 50%–100% more than those with excellent credit—even if they have a clean driving record.

States That Limit or Ban Credit Scoring

If you live in:

California
Massachusetts
Hawaii

—insurers cannot use credit scores to set auto rates. Other states have restrictions or are considering reforms.

Tips to Improve Your Rate Through Better Credit

Pay bills on time
Keep credit card balances low
Check your report for errors
Limit new credit applications
Maintain long-standing accounts

Conclusion

Yes, your credit score can absolutely affect how much you pay for car insurance. The higher your score, the more likely you are to get a lower rate. If your credit could use some work, improving it may be one of the fastest ways to reduce your premium over time.