It surprises a lot of people: in most U.S. states, your credit score affects how much you pay for car insurance — sometimes by more than a recent accident would.
Here's how it works, why it's legal, and what you can do about it.
The Short Answer
Yes, in most states, insurers use a credit-based insurance score to set your auto premium. Drivers with poor credit pay an average of 50-100% more than drivers with excellent credit, all else equal.
In a handful of states (California, Hawaii, Massachusetts, Michigan, and Washington), the practice is banned or heavily restricted.
What Is a "Credit-Based Insurance Score"?
It's not the same as your FICO score. Insurers buy a separate, simplified credit-based insurance score from LexisNexis or FICO. It uses many of the same inputs — payment history, credit utilization, length of history, types of credit, recent inquiries — but weights them differently.
Most insurers don't tell you your score directly. You can request it from LexisNexis (under the Fair Credit Reporting Act) once per year, free.
Why Insurers Use It
Carriers argue that statistically, credit score correlates with claim frequency. Drivers with lower credit-based insurance scores file claims more often, so they cost more to insure.
Whether you find that argument compelling depends on your priors. Critics point out that credit scores are heavily correlated with income and race, which means the practice can amplify existing inequalities. Defenders point to the actuarial data.
Either way, in 45 states it's legal — and used.
How Much It Actually Impacts Your Rate
Based on industry data, here's roughly how credit tier maps to premium:
| Credit tier | Approximate premium impact | |---|---| | Excellent (800+) | Baseline (no surcharge) | | Good (700-799) | +5-10% | | Fair (600-699) | +25-40% | | Poor (below 600) | +60-100% |
For context: an at-fault accident typically raises your premium by 20-40% for 3 years. So going from excellent to poor credit can hit you harder than crashing your car.
States Where Credit Doesn't Affect Your Premium
These five states either ban the practice outright or restrict it severely:
- California — Banned for auto insurance under Proposition 103.
- Hawaii — Banned.
- Massachusetts — Banned for auto.
- Michigan — Banned for personal lines as of 2020.
- Washington — Banned in 2021 (currently being challenged in court; check current status).
Some other states (Maryland, Oregon, Utah) restrict how it can be used but don't ban it outright.
How to Improve Your Insurance Score
Same basic moves that improve your FICO score:
- Pay every bill on time. Payment history is the heaviest single factor.
- Pay down credit card balances. Aim for utilization below 30% — ideally below 10%.
- Don't close old credit cards. Length of history matters.
- Don't apply for new credit unless you need it. Hard inquiries dent your score short-term.
- Dispute errors on your credit report. A single incorrect late payment can pull your score down 40-80 points.
Improvements show up in your insurance score within 30-90 days of changes hitting your credit report. Shop your auto insurance quotes again after your score improves — many drivers see meaningful premium drops.
What to Do If You Have Poor Credit Right Now
Your options, in order of impact:
- Compare quotes from multiple carriers. Different carriers weight credit differently. The carrier that hammered you on credit might not be the same one that does it to your neighbor. Shop around.
- Look at credit-friendly carriers. Some carriers (including some major direct writers and several insurtechs) lean less heavily on credit. They're not always advertised that way, but the price difference shows up in quotes.
- Ask about a usage-based discount program. Telematics programs like Progressive's Snapshot or Allstate's Drivewise reward safe driving behaviors directly, partially offsetting a credit penalty.
- Bundle home or renters insurance. Multi-policy discounts run 10-25%, which can mostly offset a credit surcharge.
- Increase your deductible. Going from $500 to $1,000 saves 10% on premium — a quick way to bring down the total bill while you work on the score.
What's Coming Next
The use of credit in insurance pricing is increasingly contested. Several state legislatures have considered restrictions in the past year. The trend, slowly, is toward more limits — but don't bank on regulatory change to lower your premium.
In the meantime, the practical move is the same as always: shop your rate every year, especially after your credit improves.
Bottom Line
In most states, your credit score is one of the biggest factors in your car insurance premium — sometimes bigger than your driving record. The good news is that it's actionable: pay on time, lower utilization, dispute errors, and compare quotes 6-12 months later.
When you're ready, compare real quotes on Quorrio — five minutes, multiple carriers, no spam.