How Credit Scores Affect Auto Insurance Rates (2024)
When it comes to how credit scores affect auto insurance rates, 46 states allow higher rates for poor credit. You can avoid as much as a 100% increase in your rates by keeping good credit. Find out how auto insurance and your credit score are related, including top providers' rates for good, fair, and poor credit.
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Kalyn Johnson
Insurance Claims Support & Sr. Adjuster
Kalyn grew up in an insurance family with a grandfather, aunt, and uncle leading successful careers as insurance agents. She soon found she has similar interests and followed in their footsteps. After spending about ten years working in the insurance industry as both an appraiser dispatcher and a senior property claims adjuster, she decided to combine her years of insurance experience with another...
Insurance Claims Support & Sr. Adjuster
UPDATED: Sep 13, 2024
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Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance related. We update our site regularly, and all content is reviewed by auto insurance experts.
UPDATED: Sep 13, 2024
It’s all about you. We want to help you make the right coverage choices.
Advertiser Disclosure: We strive to help you make confident auto insurance decisions. Comparison shopping should be easy. We are not affiliated with any one auto insurance provider and cannot guarantee quotes from any single provider. Our partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.
On This Page
When you think about all of the factors that go into your auto insurance, you usually think about various aspects of the car itself, or perhaps of your type of coverage.
Does credit score affect car insurance? You might not know it, but depending on where you live your credit score might even be one of the things your insurance company uses to determine your rates. Keep reading to learn how credit scores affect auto insurance rates in your area.
You can find and compare auto insurance quotes from many different insurance companies. Enter your ZIP code above right now.
- Forty-six states use your credit score as a factor when calculating your insurance premium
- Insurance companies use a form of the credit score (known as the “insurance score”) that takes into account things like late payments, type of credit, credit card utilization, and collections
- You can improve your credit score by paying your bills on time and utilizing the credit you already have appropriately.
States That Use Your Credit Score
Today, there are 46 states in which auto insurance companies can look at your credit score and consider it a factor in your premiums. California, Massachusetts, Hawaii, and Maryland forbid this practice, but it’s open everywhere else.
Why is insurance affected by credit score? The auto insurance companies believe that a person who has a lower credit score is less of a risk to the insurance company.
What credit score do insurance companies use? The insurance companies use a form of the credit score (known as the “insurance score”) which takes into accounts things like late payments, type of credit, credit card utilization and collections.
Some states are still struggling with this issue. For example, in Michigan, the Attorney General addressed auto insurance laws and banned the practice of considering credit in determining insurance premium rates.
The Michigan Supreme Court suggested that these scores were part of a reasonable way of classifying risk.
Read more:
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Auto Insurance Rates by Credit Score
Will insurance companies offer you lower rates if you have a good credit score? Yes, and the table below proves there’s quite a difference in your premium based on your credit score.
Full Coverage Auto Insurance Monthly Rates by Provider & Credit Score
Insurance Company Good Credit Fair Credit Bad Credit
$135 $165 $245
$166 $197 $296
$116 $136 $203
$95 $115 $175
$140 $161 $269
$82 $100 $148
$177 $226 $355
$120 $133 $166
$109 $138 $206
$91 $118 $200
$120 $155 $230
$107 $128 $194
U.S. Average $123 $148 $226
When it comes to having poor credit, you would pay an average of $103 more a month than if you had good credit. The most affordable difference is with Nationwide at $46 more a month, while the least affordable difference is with Liberty Mutual at $178 more a month.
Read more: Best Auto Insurance Companies for Drivers With Bad Credit
Other Factors to Take Into Consideration
Your credit score isn’t the only factor in your auto insurance premium rates. Your age, type of vehicle, and where you live all play a part when calculating our monthly premium.
The insurance companies each have their own formulas for how each factor is weighted. Are there insurance companies that do not use credit scores? Even in states where it’s legal for the company to consider your credit score, not all of them do. But, since the majority of providers do factor in your credit score, you need to do a company-by-company check of those who don’t.
If you’re concerned that your credit score is negatively impacting your auto insurance rates, you have a few options.
If you don’t live in California, Hawaii, Maryland, or Massachusetts, an option for no-credit-check car insurance is usage-based auto insurance. Your rate is primarily based on how you drive and how much you drive.Brandon Frady Licensed Insurance Producer
You can improve your credit score by paying your bills on time and utilizing the credit you already have appropriately. You can also consider switching to an insurance company that doesn’t use the score as a factor.
Auto insurance customers with poor credit can expect to pay up to 60% more on their premiums😱! Has your credit increased recently📈? Get updated auto insurance quotes here: https://t.co/27f1xf131D! Learn more about what affects insurance rates👉: https://t.co/1ZJQo5P2Di. pic.twitter.com/biYj1tyf3H
— AutoInsurance.org (@AutoInsurance) February 28, 2023
You can also balance out that higher cost with other choices such as getting auto insurance discounts for driving a vehicle with advanced safety features and completing a defensive driving class.
How Credit Scores Affect Auto Insurance Rates: The Bottom Line
When it comes to your auto insurance, your credit score can be a major factor in determining your costs.
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Frequently Asked Questions
What is the connection between credit scores and auto insurance rates?
Credit scores can have an impact on auto insurance rates. Insurance companies often use credit-based insurance scores, which are derived from credit history, to assess the risk associated with insuring a driver. These scores help insurers predict the likelihood of an individual filing a claim and their overall financial responsibility.
How does a credit-based insurance score differ from a regular credit score?
A credit-based insurance score is similar to a regular credit score but focuses specifically on credit-related factors that are relevant to insurance. While regular credit scores consider a broader range of financial factors, such as payment history and outstanding debt, credit-based insurance scores prioritize elements that correlate with insurance risk, such as payment patterns and credit utilization.
Can a poor credit score result in higher auto insurance rates?
Yes, a poor credit score can lead to higher auto insurance rates. Studies have shown that individuals with lower credit-based insurance scores tend to file more insurance claims, leading insurance companies to view them as higher-risk policyholders. As a result, individuals with poor credit scores may face higher premiums compared to those with better credit scores.
What is a good credit score for auto insurance?
A credit score of 700 or higher is considered a good credit score for auto insurance, whereas a fair credit score is 580-699, and a poor credit score is under 580.
Are there any states or regions where credit scores do not impact auto insurance rates?
The use of credit scores in determining auto insurance rates varies by state and region. Some states have enacted laws or regulations that restrict or prohibit the use of credit-based insurance scores. It is essential to consult your state’s insurance department or an insurance agent to understand the specific regulations in your area.
Does Progressive use credit scores?
Yes, Progressive, as do most insurance providers, uses your credit score to help them develop more accurate rates.
Does State Farm check credit for car insurance?
Yes, State Farm, as do most insurers, checks credit for car insurance unless it is forbidden by certain states.
Will shopping around for auto insurance quotes affect my credit score negatively?
No, shopping around for auto insurance quotes generally does not have a negative impact on your credit score. When you request quotes from multiple insurance companies within a short period, it is considered a “soft inquiry” and does not affect your credit score. However, be cautious of submitting multiple formal applications for credit, as those may have a slight impact on your credit score.
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Kalyn Johnson
Insurance Claims Support & Sr. Adjuster
Kalyn grew up in an insurance family with a grandfather, aunt, and uncle leading successful careers as insurance agents. She soon found she has similar interests and followed in their footsteps. After spending about ten years working in the insurance industry as both an appraiser dispatcher and a senior property claims adjuster, she decided to combine her years of insurance experience with another...
Insurance Claims Support & Sr. Adjuster
Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance related. We update our site regularly, and all content is reviewed by auto insurance experts.
