How Credit Score Affects Auto Insurance Rates

Maggie Overholt
Maggie Overholt

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. 

However, you may not realize that insurers look at a whole slew of other, more personal factors when setting premiums — including your credit score. We’ll dig into details below, but the main thing to know is a lower credit score generally equals higher premiums. 

Sample rates based on drivers age 23–35 with a liability-only insurance policy. 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.

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 — so leveling up from “very good” to “excellent” credit will net you a higher savings percentage than moving from “fair” to “good” credit. 

Based on data for drivers age 23–38 with a liability-only insurance policy. 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. 

*Generational credit scores according to Experian fourth quarter 2018 data

Working to raise your credit score is just one of the things you can do to lower your auto insurance rates. 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 95% of all personal insurers consider credit-based insurance scores when setting rates — at least in states where it’s legal to do so.  

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. The following states have banned credit-based insurance rating for all or some property and casualty insurance lines: 

*According to the American Property Casualty Insurance Association, 2019 

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. There’s a good chance your credit factors into your insurance premium, and cheaper rates are just another reason to keep your score up. 

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: 

  • 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.


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 for comparative purposes. 

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.

What’s Next? 

About the Authors

Maggie Overholt

Maggie Overholt Contributor

Maggie is a former lead insurance editor at She's written more than 70 insurance articles covering homeowners, auto, life, motorcycle, travel, and more.