You know the drill: Auto insurance rates are higher if you’ve been in an accident, got caught speeding, filed one too many claims, or own an expensive car that would cost a lot to replace. These kinds of things could cost your insurer big bucks down the road, so it makes sense they raise premiums to mitigate risk. Since 2020, overall auto premiums have also climbed because claim severity, parts and labor costs, and litigation have all increased — so any surcharge or discount tied to rating factors now shows up as a larger dollar difference than a few years ago BLS CPI.
However, you may not realize that insurers look at a whole slew of other, more personal factors when setting premiums — including your credit score. In most states, lower credit generally equals higher premiums; multiple 2025 analyses find drivers with poor credit often pay about 60%–110% more than drivers with excellent/very good credit, translating to roughly $1,500–$2,500 more per year for full coverage on average NAIC The Zebra NerdWallet Bankrate.
Sample rates based on drivers age 23–35 with a liability-only insurance policy (in states where credit use is permitted). Your own premium will vary. Learn how we tested credit-based auto insurance rates in our Methodology below.
Higher Credit Can Lead to Lower Auto Insurance Rates
Your “credit-based insurance score” (the metric insurers use when setting rates) is a little different than your credit score. However, the two are loosely correlated because both are based on your credit report. That means credit score can still be a good predictor of how credit will impact your rates, even though insurers use different, risk-focused credit attributes NAIC.
Our study showed that premiums can drop significantly when you move up by one credit tier. Savings become more meaningful the higher your credit is — typical national patterns across recent filings and quote studies show Good vs. Fair is often +15% to +30%, Fair vs. Poor another +35% to +60%, and Poor vs. Excellent roughly +60% to +110% for full coverage on average The Zebra NerdWallet Bankrate.
Based on data for drivers age 23–38 with a liability-only insurance policy and standardized driver profiles; impacts vary by state and insurer. Learn how we tested credit-based auto insurance rates in our Methodology below.
Younger Drivers Have Lower Credit, Higher Insurance Rates
It’s widely known that younger drivers pay more for auto insurance than older drivers. The main reason for this disparity is simple: More years of driving experience under your belt equals safer driving habits (in most cases, at least).
However, factors other than age can contribute to higher premiums for young drivers, too. Credit is one of those factors. Lower credit scores on average can cause already-pricey rates to spike even further. Younger cohorts tend to have lower average credit scores, while the national average FICO Score sits around 717; that gap often translates into higher premiums where credit is used in pricing FICO Experian. In states that prohibit credit use for auto (e.g., California, Hawaii, Massachusetts), this particular pricing difference does not apply NAIC.
*Generational credit scores according to Experian fourth quarter 2018 data; recent releases show similar rank order by age, with a national average around 717 in 2024 FICO.
Working to raise your credit score is just one of the things you can do to lower your auto insurance rates. In most states, you also have rights to dispute credit information and to request relief for extraordinary life circumstances under state laws; insurers must provide adverse-action reasons when credit affects your rate NAIC CFPB. And hey, a higher credit score will help you out next time you apply for something like a credit card or mortgage loan, too.
What’s an Insurance Score?
Insurers don’t think about credit in the same way as a credit card company or lender. Instead of looking at your overall credit score, insurance companies dig into your credit report and cherry-pick certain facts to create something called a “credit-based insurance score.”
The National Association of Insurance Commissioners explains credit-based insurance scores like this: “A regular credit score looks at many different factors to determine how likely you are to repay a loan or a line of credit. A credit-based insurance score looks at some, but not all, factors in your credit history to determine how you are likely to manage your risk exposure.”
According to FICO, the primary source for credit rating services, there are five main components that make up your insurance score:
- Credit payment history
- Current debts owed
- Length of history
- Number of new cards or lines of credit
- Types of credit used
FICO estimates that most personal insurers consider credit-based insurance scores when setting rates — at least in states where it’s legal to do so NAIC.
Some States Ban Credit-Based Insurance Rates
FICO’s estimate shows that most major insurance companies use credit-based rating to lower their risk pool and increase profits. However, insurance companies must obey industry regulations, which vary by state. Credit use in personal auto is prohibited in California, Hawaii, and Massachusetts, while most other states permit it with guardrails (e.g., disclosures, dispute rights, and extraordinary life circumstance exceptions). Washington State’s attempted administrative ban was overturned and credit use is currently allowed there with notice requirements, and Colorado now requires governance and testing of external consumer data and algorithms to prevent unfair discrimination NAIC NCSL Washington OIC Colorado DOI.
*According to the American Property Casualty Insurance Association, 2019 For current consumer guidance on where credit is allowed or prohibited, see NAIC and NCSL.
Arguments For and Against Credit-Based Insurance Rates
Many argue that credit-based insurance pricing puts certain people at an unfair disadvantage. United Policyholders (UP), a nonprofit that aims to inform and empower insurance customers, is one such group. UP argues credit-based rating is an unfair practice because:
- Credit reporting errors and missing information can be hard to correct
- People going through economic or medical hardship often see a drop in credit
- Credit-based rates can disproportionately affect low-income or minority communities
That said, insurers go to lengths to reassure drivers that factors like these won’t work against them. The American Property Casualty Insurance Association (APCI) states:
- Nearly every state has laws to ensure the fair and accurate use of credit information by insurance companies
- Many states require insurers to provide exceptions for consumers affected by extraordinary life circumstances, such as a job loss or divorce
- Insurance scores do not include income information, only risk-relevant variables like payment history or public records that are indicators of potential future risk
When asked why credit-based insurance rating works, APCI also states: “We don’t know exactly why. Some theorize that people who are fastidious in managing their credit are similarly disposed in other areas of their lives. Regardless of the actual reason why, it’s important to remember insurers are not legally required to provide an explanation as to why a particular rating factor is predictive.”
Whichever way you lean on the fairness question, the important thing to remember is that credit-based insurance rating happens in most states, and affordability concerns have intensified as overall premiums rose in recent years BLS CPI. There’s a good chance your credit factors into your insurance premium (except in states that prohibit it), and regulators are increasingly focused on governance and fairness testing for models that use credit and other external data Colorado DOI NY DFS.
Tips for Raising Your Credit Score and Insurance Score
The trick to building credit is to be prudent and take it slow. Don’t open too many lines of credit right off the bat or spend more than you can pay off on a monthly basis. Simple steps to raise credit include, along with checking your reports for errors and understanding your rights to adverse-action notices and dispute processes if credit affects your insurance pricing CFPB NAIC:
- Pay off your credit card(s)
- Pay bills on time
- Build new lines of credit gradually
- Keep an eye on your score
Learn more with this article about how young people can raise low credit scores — or start building credit if they’re currently at zero.
Methodology
We worked with Quadrant Information Services to analyze data on credit-based auto insurance rates in all 50 states. Quadrant provides data on premiums using information insurers are required to file with state insurance departments. Rates are based on sample profiles created by Reviews.com for comparative purposes. Where credit-based rating is prohibited, credit is not used in pricing comparisons; where permitted, impacts reflect insurer filings and market quotes NAIC SERFF.
Pricing information shown here includes rates for drivers aged 23, 27, 31, and 35 years, both male and female, driving a 2017 Toyota Camry with annual mileage of 15,000. All profiles have a clean driving record and carry a minimum liability insurance policy.
We checked rates for the top four to 10 insurers in every state by market share, with data coming from more than 34,000 ZIP codes across the U.S. These rates are a sample set meant for comparison only. Your own rates will vary.
