Drivers with poor credit pay 40-100% more for auto insurance than drivers with excellent credit -- a difference that can exceed $1,000+ per year for identical coverage in the same ZIP code.
Your credit score affects far more than your ability to borrow money. In 46 states, it is one of the most powerful factors determining how much you pay for auto insurance. Drivers with poor credit routinely pay 40-100% more than drivers with excellent credit for identical coverage -- and in some cases, the penalty is even steeper.
Understanding how credit-based insurance scoring works, why insurers use it, and what you can do to improve your score gives you a concrete path to lower premiums. This guide covers everything you need to know about the relationship between credit and auto insurance in 2026, including which states ban the practice, how much you can expect to save by improving your credit, and actionable strategies to start improving your score today.
How Your Credit Score Affects Auto Insurance Rates
In most states, your credit-based insurance score is one of the top three factors insurers use to price your policy, alongside your driving record and your location. The connection may seem surprising -- what does paying your credit card bill on time have to do with car accidents? -- but decades of actuarial data show a strong, consistent correlation between credit history and the likelihood of filing insurance claims.
Insurers are not looking at your credit score to judge your character or financial responsibility in a moral sense. They are using it as a statistical predictor. Large-scale studies, including a comprehensive report by the Federal Trade Commission (FTC), have confirmed that credit-based insurance scores are effective predictors of risk across all demographic groups. Drivers with lower credit scores file more claims and file larger claims, on average, than drivers with higher scores.
The practical impact on your wallet is significant. A driver with a poor credit-based insurance score might pay $2,000-$3,000 per year for coverage that would cost a driver with excellent credit only $1,200-$1,500. That difference adds up to thousands of dollars over the life of a policy. This makes your credit score one of the highest-leverage factors you can improve to reduce your auto insurance costs.
It is worth noting that the weight given to credit varies by insurer. Some companies rely heavily on credit-based scores, while others give them moderate weight. This is one of the reasons comparison shopping is especially important for drivers with lower credit -- the insurer that penalizes your credit the least might save you hundreds of dollars per year.
What Is a Credit-Based Insurance Score?
A credit-based insurance score is a specialized score calculated from your credit report data, but it is not the same as your FICO score or VantageScore. Insurers use proprietary models -- the two most common are LexisNexis Attract and FICO Insurance Score -- that weight credit factors differently than traditional lending scores.
Your credit-based insurance score is built from the same underlying credit report data, but the emphasis is different. Here is how the factors are typically weighted:
| Factor | Weight | What It Measures |
|---|---|---|
| Payment History | ~40% | On-time payments vs. late payments, collections, charge-offs |
| Outstanding Debt | ~30% | Credit utilization ratio (balances vs. limits) |
| Length of Credit History | ~15% | Age of oldest account and average account age |
| New Credit Inquiries | ~10% | Recent hard inquiries from loan/credit applications |
| Credit Mix | ~5% | Diversity of credit types (cards, loans, mortgage) |
The key difference between your FICO lending score and your credit-based insurance score is that the insurance model is calibrated to predict insurance claims, not loan defaults. A person might have a decent FICO score but a poor insurance score (or vice versa) because the models weight the same data points differently.
You generally cannot see your credit-based insurance score directly. However, the factors that improve your regular credit score also improve your insurance score, so focusing on credit health in general is the right approach.
How Much More Do Drivers With Bad Credit Pay?
The cost difference between credit tiers is dramatic. The following table shows approximate average annual premium differences by credit tier for full coverage auto insurance, based on 2025-2026 industry data:
| Credit Tier | Avg. Annual Premium | % More Than Excellent | Annual Cost Difference |
|---|---|---|---|
| Excellent (800+) | $1,300 | -- | -- |
| Good (670-799) | $1,560 | +20% | +$260 |
| Fair (580-669) | $1,950 | +50% | +$650 |
| Poor (300-579) | $2,470 | +90% | +$1,170 |
These are national averages -- the actual difference in your state and with your insurer may be larger or smaller. In some states and with some carriers, drivers with poor credit pay more than double what drivers with excellent credit pay. Over a five-year period, the cumulative cost difference between poor and excellent credit can exceed $5,000-$6,000.
The financial impact of poor credit on insurance is comparable to -- and in some cases exceeds -- the impact of a major traffic violation. A driver with excellent credit and a speeding ticket might actually pay less than a driver with poor credit and a clean record. This underscores how heavily insurers weight credit data.
The silver lining: Because insurers vary widely in how much they penalize poor credit, comparison shopping is your most powerful tool if your credit is less than excellent. The carrier that charges you the least for your credit profile might be very different from the carrier that would be cheapest for a driver with perfect credit. Always get at least 5-7 quotes if your credit is fair or poor.
States That Ban Credit Scoring in Auto Insurance
Four states have fully banned or heavily restricted the use of credit scores in auto insurance pricing:
- California -- Proposition 103 prohibits insurers from using credit scores to set auto insurance rates. California uses driving record, years of driving experience, and annual miles driven as its primary rating factors.
- Hawaii -- State law prohibits the use of credit information in auto insurance underwriting and rating.
- Massachusetts -- Credit scores cannot be used as a factor in auto insurance pricing.
- Michigan -- Legislation enacted in recent years prohibits insurers from using credit scores in auto insurance rating.
If you live in one of these states, your credit score has no direct impact on your auto insurance premium. However, you should still maintain good credit for all the other financial benefits it provides.
Even in states that do not ban credit scoring, the rules are evolving. Several states have introduced partial restrictions, and consumer advocacy groups continue to push for broader bans. Check your state's current regulations to understand how credit affects your premium.
Several other states have partial restrictions on credit use in insurance. For example, some states limit how much weight credit can carry in the overall pricing formula, prohibit using the absence of a credit history as a negative factor, or require insurers to re-check credit at renewal and provide the benefit of any improvement. Oregon, Maryland, and Utah have implemented various restrictions along these lines.
The landscape of credit-in-insurance regulation continues to evolve. Consumer advocacy groups have pushed for broader bans, arguing that credit-based scoring disproportionately affects lower-income drivers, while the insurance industry maintains that credit data improves pricing accuracy and benefits the majority of drivers. Check your state's current regulations if you are unsure how credit is used in your area.
How to Improve Your Credit-Based Insurance Score
Improving your credit-based insurance score uses the same strategies as improving your regular credit score. The changes are not instant -- meaningful improvement typically takes 3-12 months -- but the payoff in lower insurance premiums (plus better rates on loans, credit cards, and more) makes it one of the smartest financial moves you can make.
Here are the most effective strategies, ranked by impact:
Pay Every Bill on Time
Payment history is the single largest component of your credit-based insurance score. Even one late payment can cause a noticeable drop. Set up autopay for at least the minimum payment on every account to ensure you never miss a due date. If you have existing late payments on your credit report, focus on keeping all accounts current going forward -- the impact of old late payments diminishes over time.
Set up autopay for the minimum payment on every account as a safety net, then make additional manual payments when you can. This ensures you never miss a due date -- the single most damaging event to your insurance score.
Reduce Your Credit Card Balances
Your credit utilization ratio -- the percentage of your available credit that you are using -- is the second most important factor. Aim to keep balances below 30% of your credit limit on each card, and ideally below 10% for the best scores. If you are carrying high balances, prioritize paying them down. Even partial balance reduction can improve your score meaningfully.
Avoid Opening Unnecessary New Accounts
Each new credit application generates a hard inquiry on your credit report, which can lower your score slightly. More importantly, new accounts reduce your average account age, which is a negative factor. Only open new credit accounts when you genuinely need them.
Do Not Close Old Accounts
Closing old credit card accounts reduces your total available credit (which increases your utilization ratio) and can shorten your credit history. Even if you no longer use a card, keeping the account open -- especially if it has a long history -- helps your score.
Check Your Credit Report for Errors
Errors on credit reports are more common than most people realize. Request your free annual credit reports from all three bureaus (Equifax, Experian, TransUnion) at AnnualCreditReport.com and review them carefully. Dispute any inaccuracies, as a single erroneous collection or late payment could be costing you hundreds of dollars in higher insurance premiums.
Pull your credit reports from all three bureaus -- errors often appear on only one. Disputing and correcting a single inaccurate collection or late payment can improve your insurance score enough to save hundreds per year.
Build Credit History If You Have a Thin File
If you have little or no credit history, your insurance score will suffer. Consider opening a secured credit card, becoming an authorized user on a family member's account, or using a credit-builder loan to establish a track record. Even six months of positive credit activity can begin moving your score in the right direction.
Does Checking Insurance Quotes Affect Your Credit Score?
Insurance companies use soft inquiries when checking your credit for a quote -- this has zero impact on your credit score. You can shop for as many quotes as you want without any negative effect.
No. When insurance companies check your credit to generate a quote, they perform a "soft inquiry" (also called a soft pull), which does not affect your credit score in any way. You can shop for auto insurance quotes from as many companies as you want without any negative impact on your credit.
This is an important distinction from certain other types of credit checks. When you apply for a loan, credit card, or mortgage, the lender performs a hard inquiry, which can lower your score by a few points. Insurance quote checks are different -- they are informational only and are not visible to other creditors.
This means there is absolutely no reason to limit your comparison shopping out of concern for your credit score. In fact, getting more quotes is one of the best things you can do to find a lower rate, especially if your credit is less than perfect. For a complete walkthrough of the quote comparison process, see our comparison shopping guide.
Getting Good Rates With Fair or Poor Credit
Yes, it is possible to find competitive auto insurance rates even with fair or poor credit -- but it requires more effort. Because insurers weight credit differently, the "cheapest" insurer for a driver with excellent credit is often not the cheapest insurer for a driver with poor credit. The rate rankings can shift dramatically based on credit tier.
Here are strategies to find the best rate when your credit is working against you:
- Get more quotes, not fewer. While any driver should compare at least 3-5 quotes, drivers with lower credit should aim for 5-7 or more. The variance between the cheapest and most expensive carrier is wider for drivers with poor credit, so casting a wider net pays off.
- Look at regional and smaller insurers. National brands are not always the cheapest for drivers with credit challenges. Regional carriers, mutual companies, and smaller insurers sometimes weight credit less heavily in their pricing models.
- Consider states where credit is restricted. If you are relocating and have flexibility in your destination, states that ban credit in insurance pricing (California, Hawaii, Massachusetts, Michigan) eliminate the credit penalty entirely.
- Maximize every other discount. If your credit is dragging your rate up, offset the impact by claiming every available discount -- bundling, safe driver, paperless billing, pay-in-full, autopay, and more. Stacking multiple discounts can save hundreds.
- Explore usage-based insurance. Telematics programs that monitor your driving habits base your rate heavily on actual driving behavior rather than credit. If you are a safe driver with poor credit, a usage-based program could give you a rate that reflects your driving rather than your credit history.
- Ask about re-rating. Some insurers will re-check your credit mid-term if you have made significant improvements. While most re-rate at renewal, it does not hurt to ask if you have recently paid off debt or corrected errors.
Can Improving Credit Lower Your Auto Insurance?
Yes, and the effect can be meaningful. Insurers typically reassess your credit-based insurance score when your policy comes up for renewal -- usually every six or twelve months. If your score has improved since your last renewal, your premium may decrease.
The magnitude of savings depends on how much your score has improved and how heavily your insurer weights credit. Moving from the "poor" tier to "fair" might save you $300-$500 per year. Moving from "fair" to "good" could save another $200-$400. Over time, sustained credit improvement can reduce your premium by 20-40% or more.
The key is that insurers re-evaluate at renewal, not continuously. If you improve your credit between renewals, the benefit shows up at your next renewal date. This is another reason to shop your renewal -- if your current insurer does not adequately reflect your improved credit, a competitor might.
Here is a practical timeline for credit improvement and its insurance impact:
- 0-3 months: Pay all bills on time, correct errors on your credit report, pay down high balances. You may see initial score movement.
- 3-6 months: Continued on-time payments build a stronger recent history. Score improvements of 20-50 points are possible if you have reduced utilization and corrected errors.
- 6-12 months: With consistent positive behavior, your credit-based insurance score should improve noticeably. Time your renewal or re-shopping effort to capture the benefit.
- 12-24 months: Significant improvements are achievable. If you have moved up a full credit tier, the insurance savings can be substantial.
Pair credit improvement with regular comparison shopping to ensure you are always getting the best rate your improved profile deserves.
How Often Do Insurance Companies Check Credit?
Insurers typically check your credit-based insurance score at two key points: when you first apply for a policy and when your policy renews. Most auto insurance policies renew every six months or annually, so your credit is usually checked once or twice per year.
Some important details about credit checks at renewal:
- Most states require re-checking. In the majority of states, insurers must use an updated credit score at renewal rather than the original score from when you first purchased the policy. This means improvements in your credit are reflected in your premium over time.
- Some insurers check more frequently. A few carriers may pull credit at other intervals, but this is less common.
- You benefit from improvement. If your credit has improved since your last renewal, your premium should decrease (or at least not increase as much as it otherwise would).
- Declining credit can raise your rate. Conversely, if your credit has deteriorated, your premium may increase at renewal. This is another reason to maintain good credit habits consistently.
If you believe your credit has improved significantly since your last renewal, you have two options: wait for your next renewal and see if the improvement is reflected, or shop for new quotes immediately, since a new insurer will pull your current credit when generating a quote.
Does Filing for Bankruptcy Affect Auto Insurance?
A bankruptcy filing can remain on your credit report for 7-10 years and significantly increase your auto insurance premiums during that entire period. The impact is most severe in the first 2-3 years after filing.
Yes, filing for bankruptcy has a significant negative impact on your credit-based insurance score and will likely increase your auto insurance premiums. A Chapter 7 bankruptcy stays on your credit report for 10 years, and a Chapter 13 bankruptcy remains for 7 years. During that time, your insurance score will be negatively affected.
The impact is most severe in the first two to three years after filing. During this period, your credit-based insurance score will be at its lowest, and your insurance premiums will be at their highest. As time passes and you rebuild your credit with positive payment history and responsible credit use, the impact of the bankruptcy diminishes gradually.
If you have filed for bankruptcy or are considering it, here is what to know about auto insurance:
- You can still get coverage. No insurer will refuse to cover you solely because of a bankruptcy, but you will pay more.
- Shop aggressively. The bankruptcy penalty varies widely between insurers. Some weight recent credit behavior more heavily than the bankruptcy itself, so carriers that focus on recent payment patterns may offer better rates.
- Focus on rebuilding. Every month of on-time payments and responsible credit use after a bankruptcy helps your insurance score recover. The strategies outlined in the improvement section above apply doubly here.
- Consider usage-based insurance. Programs that base rates on driving behavior rather than credit can help bypass the bankruptcy penalty on your premiums.
- Look at all your discount options. Stacking bundling, safe driver, pay-in-full, and other discounts can partially offset the credit-related surcharge.
Bankruptcy is a major financial event, but it is not permanent. With consistent credit rebuilding, your insurance rates will gradually improve, and the bankruptcy's impact on your premiums will fade well before it drops off your credit report entirely.
The Bottom Line: Credit and Auto Insurance
Your credit-based insurance score is one of the most impactful -- and most improvable -- factors in your auto insurance premium. Unlike your age or location, your credit score responds directly to your financial behavior, and improvements translate into real dollar savings on your insurance.
Here is a summary of the key takeaways:
- Credit matters -- a lot. In 46 states, your credit-based insurance score is a top-three pricing factor. The difference between poor and excellent credit can be $1,000+ per year in premiums.
- It is not your FICO score. Insurers use a specialized model, but the factors that improve your FICO score also improve your insurance score.
- You can improve it. Pay bills on time, reduce balances, avoid unnecessary new credit, and correct errors on your credit report.
- Improvements show up at renewal. Insurers re-check your credit when your policy renews, so sustained improvement will lower your rate.
- Shopping is essential. Because insurers weight credit differently, comparison shopping is the single most effective strategy for drivers with lower credit scores.
- Four states ban it. California, Hawaii, Massachusetts, and Michigan do not allow credit in auto insurance pricing.
- Quotes do not hurt your credit. Insurance credit checks are soft inquiries -- shop freely.
Take control of your credit, and your auto insurance rate will follow.
Related Guides
- What Affects Auto Insurance Rates the Most? -- See how credit fits into the full picture of rate factors.
- Auto Insurance Discounts & Savings Opportunities -- Offset credit-related surcharges with every available discount.
- How to Comparison Shop for Auto Insurance -- The essential guide for finding the best rate, especially with lower credit.