Does Credit Score Affect Car Insurance Rates? 2026

How Credit Score Affects Car Insurance Rates

Average rate increases by credit tier (national average):

Excellent credit (750+):

• Premium: $1,200–$1,800/year (baseline)
• Rate impact: Best available rates
• Insurer treatment: Preferred customer, access to all discounts

Good credit (700–749):

• Premium: $1,350–$2,000/year
• Rate increase: +10–15% vs. excellent
• Additional cost: +$150–$300/year

Fair credit (650–699):

• Premium: $1,500–$2,400/year
• Rate increase: +20–30% vs. excellent
• Additional cost: +$300–$600/year

Poor credit (600–649):

• Premium: $1,800–$3,000/year
• Rate increase: +40–65% vs. excellent
• Additional cost: +$600–$1,200/year

Very poor credit (below 600):

• Premium: $2,200–$3,600/year
• Rate increase: +70–100% vs. excellent
• Additional cost: +$1,000–$1,800/year

Real-world example:

A 35-year-old with a clean driving record in Texas:

• Excellent credit (780): $1,400/year
• Poor credit (580): $2,800/year
• Difference: $1,400/year or 100% increase

Over 10 years, the driver with poor credit pays $14,000 more for identical coverage.

What Is a Credit-Based Insurance Score?

It's NOT your regular credit score.

Insurance companies use credit-based insurance scores, which are calculated differently than traditional credit scores (FICO or VantageScore).

Key differences:

Traditional credit score (FICO):

• Range: 300–850
• Purpose: Predict loan repayment likelihood
• Factors: Payment history (35%), amounts owed (30%), length of history (15%), new credit (10%), types of credit (10%)

Credit-based insurance score:

• Range: Varies by model (often 200–997 or similar)
• Purpose: Predict insurance claim likelihood
• Factors: Similar to credit score but weighted differently
• No income consideration: Insurance scores don't consider income, race, gender, marital status, or address

Factors in credit-based insurance score (approximate weights):

1. Payment history (40%): Late payments, collections, bankruptcies

2. Outstanding debt (30%): Credit utilization ratio, total balances

3. Length of credit history (15%): Age of oldest account, average account age

4. Pursuit of new credit (10%): Recent inquiries, new accounts

5. Mix of credit (5%): Diversity of credit types (credit cards, auto loans, mortgages)

Why insurers use it: Decades of actuarial data show strong correlation between credit management and claim frequency/severity. Drivers who manage credit responsibly tend to file fewer and smaller claims.

States Where Credit CANNOT Affect Your Rate

4 states prohibit credit-based insurance scoring:

1. California

• Credit banned since 1988
• Insurers must use driving record, mileage, years of experience
• Impact: Drivers with poor credit pay less; drivers with excellent credit pay more than in other states

2. Hawaii

• Credit banned since 2002
• Insurers rely heavily on driving record and claims history

3. Massachusetts

• Credit banned since 2008
• Heavily regulated insurance market with state-approved rates

4. Michigan

• Credit banned since 2019 (recent reform)
• No-fault state with highest average premiums in U.S.

Additional restrictions:

• Maryland: Insurers can't use credit to deny, cancel, or refuse to renew policies (but can use for pricing)
• Oregon: Insurers must offer "exceptional life circumstances" exceptions for credit drops due to catastrophic events
• Utah: Insurers must notify customers if credit negatively impacted rate

If you live in CA, HI, MA, or MI and have poor credit, you benefit from not being penalized. If you have excellent credit, you won't receive the discount available in other states.

Your insurance score may differ from your credit score.

Steps to check your credit-based insurance score:

Option 1: Request from your insurer

• Many insurers disclose your insurance score if you ask
• Call your agent or customer service
• They may provide a score range rather than exact number

Option 2: Check with credit bureaus

Insurance scores are typically calculated by:

• LexisNexis (Attraxion score)
• FICO (FICO Auto Insurance Score)
• TransUnion (TransUnion Insurance Score)

You can request these scores directly:

• LexisNexis: PersonalReports.LexisNexis.com (free annual report)
• FICO: MyFICO.com (paid service, ~$40)
• TransUnion: TransUnion.com (free credit report; insurance score may be extra)

Option 3: Review your regular credit reports

While not identical to insurance scores, your credit reports reveal the underlying data:

• AnnualCreditReport.com: Free annual reports from Equifax, Experian, TransUnion
• Review for errors, late payments, collections, high balances

Option 4: Ask why your rate changed

• If your rate increased and you haven't filed claims, ask your insurer if credit was a factor
• Under federal law (Fair Credit Reporting Act), insurers must notify you if they took "adverse action" based on your credit
• You're entitled to know which report they used and can request a free copy

Red flags in your credit report that hurt insurance scores:

• Late payments (30+ days) in the past 2 years
• Collections or charge-offs
• Bankruptcies (remain for 7–10 years)
• High credit utilization (>30% of available credit)
• Recent inquiries (too many in short period)
• Short credit history (<3 years)
• No mix of credit types (only credit cards, no installment loans)

How to Improve Your Credit Score to Lower Insurance Rates

Credit improvements can reduce insurance premiums within 6–12 months.

Immediate actions (0–3 months):

1. Pay all bills on time

• Set up automatic payments
• Even one 30-day late payment can drop your score 60–100 points
• Impact: Payment history is 40% of insurance score

2. Pay down credit card balances

• Goal: Keep utilization below 30% of available credit
• Ideal: Below 10%
• Example: If you have $10,000 total credit limit, keep balances under $3,000 (preferably under $1,000)
• Impact: Can improve score 20–50 points in 1–2 billing cycles

3. Dispute errors on credit reports

• 1 in 5 people have errors on credit reports
• Common errors: Accounts that aren't yours, incorrect late payments, outdated collections
• Dispute with Equifax, Experian, and TransUnion (free online)
• Impact: Removing one erroneous late payment can boost score 30–60 points

4. Don't close old credit cards

• Even if unused, keep old accounts open to maintain length of credit history
• Closing accounts reduces available credit and shortens average account age

Medium-term actions (3–12 months):

5. Avoid new credit inquiries

• Each hard inquiry can drop score 5–10 points
• Multiple inquiries in short period signal financial stress
• Exception: Rate shopping for mortgages/auto loans within 14–45 days counts as single inquiry

6. Diversify credit types

• If you only have credit cards, consider adding an installment loan (auto, personal)
• Mix of credit types shows responsible management
• Caution: Don't take on debt just for credit score—only if needed

7. Become an authorized user

• Ask family member with excellent credit to add you as authorized user on their account
• Their positive history can boost your score
• Risk: If they miss payments, it hurts your score too

8. Pay off collections and charge-offs

• Negotiate "pay for delete" if possible (creditor removes from report after payment)
• At minimum, settle debts to show resolution
• Note: Paid collections still hurt score but less than unpaid

Long-term strategies (12+ months):

9. Let time heal old negatives

• Late payments: Impact fades after 2 years, removed after 7 years
• Collections: Removed after 7 years
• Bankruptcies: Chapter 7 removed after 10 years, Chapter 13 after 7 years

10. Build a long, positive history

• The longer your clean payment history, the better your score
• Focus on consistency: Pay everything on time, every time

Timeline to see insurance savings:

• 3–6 months: Insurer may recalculate at policy renewal
• 6–12 months: Significant credit improvements reflected in rate
• 12–24 months: Full impact realized

Expected savings from credit improvement:

Moving from poor (600) to good (720):

• Rate reduction: 25–50%
• Annual savings: $400–$1,000
• 10-year savings: $4,000–$10,000

Does Shopping for Insurance Hurt Your Credit?

No. Insurance quotes do NOT affect your credit score.

Why:

• Insurance companies perform "soft pulls" (soft inquiries) when quoting
• Soft pulls are visible only to you on your credit report
• They do not impact your credit score
• Unlimited insurance quotes = zero credit score impact

Exception: If you finance your premium (pay monthly instead of in full), the insurer may run a hard inquiry to determine financing terms. This can drop your score 5–10 points temporarily.

What you can do:

• Shop for insurance as often as you want—quarterly, monthly, etc.
• Compare 10+ insurers without worry
• Best practice: Get quotes from 5–10 companies annually

Contrast with auto loans: Applying for an auto loan triggers hard inquiries, which do impact your score (but multiple inquiries within 14–45 days count as one).

What If Your Credit Dropped Due to Circumstances Beyond Your Control?

Some insurers and states offer "extraordinary life circumstances" exceptions.

Qualifying events (varies by insurer and state):

1. Catastrophic illness or injury

• Major medical expenses leading to unpaid bills

2. Death of spouse or immediate family member

• Financial disruption from loss of income

3. Divorce

• Financial upheaval from separation of assets

4. Involuntary job loss (layoff, not termination for cause)

• Unemployment leading to late payments

5. Natural disaster

• Home destroyed, leading to financial stress

6. Identity theft

• Fraudulent accounts damaging credit

How to request exception:

Step 1: Contact your insurer and explain the situation

Step 2: Provide documentation (medical records, death certificate, layoff notice, police report for identity theft, etc.)

Step 3: Request rate recalculation excluding credit score or using pre-event credit score

Step 4: If denied, file complaint with your state's Department of Insurance

States with strongest protections:

• Oregon: Law requires insurers to offer exceptions
• Maryland, Nevada, Washington: Regulations encouraging leniency

Success rate: Varies widely. Some insurers have formal exception processes; others handle case-by-case. Always ask—worst case, they say no.

Should You Switch Insurers If You Improve Your Credit?

Yes—but shop first to confirm savings.

When to shop after credit improvement:

1. Your credit score increased 50+ points

• Significant enough to move credit tiers
• Potential savings: 15–30%

2. You paid off major collections or charge-offs

• Reduces perceived risk

3. Bankruptcy fell off your report (7–10 years)

• Removes biggest credit negative
• Potential savings: 30–60%

4. It's been 6–12 months since improvement

• Gives credit score time to reflect changes

How to shop:

Step 1: Request rate recalculation from current insurer

• Some insurers automatically check credit annually at renewal
• Others require you to request it
• Call and say: "My credit has improved significantly. Can you re-run my credit-based insurance score and adjust my rate?"

Step 2: Get quotes from 5–10 competitors

• Each insurer weights credit differently
• Some specialize in improved-credit drivers

Step 3: Compare apples-to-apples coverage

• Use identical limits, deductibles, and coverages

Step 4: Switch if savings justify effort

• If competitor is $300+/year cheaper, switch
• If current insurer matches or gets close, consider staying (loyalty discounts, convenience)

Real-world example:

Driver improved credit from 620 to 740 over 18 months:

• Old rate (credit 620): $2,400/year
• Current insurer re-rated (credit 740): $1,750/year (saves $650)
• New insurer quote (credit 740): $1,450/year (saves additional $300)
• Total savings by switching: $950/year

Pro tip: Set a calendar reminder to shop for insurance 12 months after any major credit improvement.

Frequently Asked Questions