How Does Your Credit Score Affect Auto Insurance Rates?
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A higher credit score decreases your car insurance rate with almost every insurance company and in most states. Getting a quote, however, does not affect your credit.
How much does your credit rating affect insurance rates?
Poor credit raises rates by 72% compared to having good credit.
Poor credit can mean a major jump in the price of your insurance, and good credit can lead to big savings.
The effects of credit ratings differ to a degree between states and vary heavily between companies. In some cases, your credit score could double what you pay or cut nearly a quarter off your bill.
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Car insurance rates could vary by more than $250 per month based on credit score and insurance company. The difference between poor and good credit means more than a $70 difference in monthly car insurance rates.
Insurers also do not have a unified definition of credit tiers, with slightly different ranges depending on the company.
Car insurance rates by credit score in your state
How do credit scores affect car insurance rates?
A driver's credit score has a noticeable effect on car insurance prices. The vast majority of insurers use credit scores as a factor.
Your credit score, also called a FICO Score, is based on five factors, all related to your borrowing history and current situation.
- Payment history: 35%
- Amount owed: 30%
- Length of credit history: 15%
- Mix of credit types: 10%
- New credit: 10%
Credit scores range from 300 to 850. They are often divided into several tiers.
Credit score tier by FICO scores
Tier | FICO Score |
|---|---|
| Excellent | 800-850 |
| Very good | 740-799 |
| Good | 670-739 |
| Fair | 580-669 |
| Poor | 300-579 |
However, it is not as simple as a certain score matching a certain rate. Insurance companies take your full credit report and run it through an algorithm to determine an "insurance score."
A credit-based insurance score doesn't measure how creditworthy you are, but rather how risky you are from an auto insurance perspective, based on your creditworthiness.
How much your score affects your rates may vary between states. Five states — California, Hawaii, Massachusetts, Michigan and Washington — ban the use of any sort of credit report as a factor in determining insurance rates. Instead, these states opt to base rates on driving record, location and other characteristics.
Drivers can also be penalized for a lack of credit history, which is often equivalent to having a poor credit history from an insurer's perspective. Some states, including New Jersey and Rhode Island, prohibit insurers from penalizing drivers for a lack of credit history, meaning drivers may be better off with no credit history rather than a poor one.
Worst states for drivers with bad credit
Poor credit raises rates the most for drivers in Arizona, by an average increase of 175%. Arizona is one of six states, along with Texas, New Hampshire, New Jersey, Minnesota and New York, where poor credit more than doubles your rates.
On the other end of the spectrum, drivers with poor credit in New Mexico see the smallest increase in rates, only 49%.
States with highest car insurance costs for drivers with poor credit
State | Good credit monthly rate | Poor credit monthly rate | Increase |
|---|---|---|---|
| Arizona | $160 | $440 | 175% |
| New York | $149 | $364 | 144% |
| Minnesota | $140 | $308 | 120% |
| New Jersey | $159 | $345 | 117% |
| New Hampshire | $130 | $281 | 116% |
| Texas | $136 | $290 | 113% |
| Wisconsin | $105 | $207 | 97% |
Do insurance companies check your credit?
To get auto insurance, your credit will be checked in almost every case. Every major auto insurer uses drivers' credit history in some capacity, according to a report from the Federal Trade Commission.
A few states like California, Hawaii, Massachusetts, Washington and Michigan forbid insurance companies from using credit to determine car insurance rates.
The reason insurers check your credit is because studies have shown that credit rating tends to be a good indicator of how many claims a driver will file. That allows insurers to match more expensive rates with drivers who will likely use their insurance more.
Does getting a car insurance quote affect your credit score?
Getting a car insurance quote should not affect your credit score. The credit check process involved in getting a quote is called a "soft pull." In contrast, a "hard pull" credit check impacts your credit score.
Soft pulls only verify some basic info and have no impact on your credit score.
Hard pulls provide a full credit history and slightly lower your credit score for a short time. If you apply to many lenders in a short period of time, a buildup of hard pulls can lower your score.
Frequently asked questions
Which car insurance companies check your credit?
Every major car insurance company checks your credit before offering a binding quote. That includes Geico, State Farm, USAA, Progressive, Allstate and Liberty Mutual. Only a few insurance companies do not check your credit.
Does credit score affect car insurance rates?
Yes. A higher or lower credit score can have a big impact on your insurance rate. Poor credit increases annual rates by 72% compared to good credit.
Does getting a car insurance quote affect credit?
No, getting an auto insurance quote does not affect your credit. Car insurers check your credit with a soft pull, which does not provide a full credit history and does not impact your score.
Does car insurance affect my credit score?
Getting car insurance should not affect your credit. If you miss payments, the insurance company might report that to credit agencies, which could impact your credit score.
Does changing car insurance affect credit score?
No. Changing insurance companies or policies does not have any effect on your credit score.
Methodology
Analysis and price data is pulled from ZIP codes in all states that use credit scores as part of calculating insurance rates. Quotes are for a 30-year-old male driver with a 2015 Honda Civic EX and a full coverage policy.
Insurance rate data came from publicly sourced insurer filings collected by Quadrant Information Services. Quotes should be used only for comparative purposes only.