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How credit score impacts car insurance

Written by Elizabeth Rivelli
Written by Elizabeth Rivelli
<h5>Edited by <a href="https://rateretriever.com/about/alyssa-dicrasto/"><span style="text-decoration: underline;">Alyssa DiCrasto</span></a></h5>
Edited by Alyssa DiCrasto
Edited by Alyssa DiCrasto
Published on 2024-01-24

Read time: 3 min

Your credit score is a reflection of your financial history. It accounts for things like the number of accounts you have open, the total amount of debt you have, and your repayment history. When you apply for an auto insurance policy, many insurance companies consider your credit score when calculating your personalized premium.

In this guide, we’ll explain the basics of credit-based insurance scores, including how your credit score can impact the cost of your car insurance policy.

Does credit score affect car insurance?

If you’re wondering, “Does credit score affect car insurance,” in most states, the answer is yes. Your credit score has a direct impact on your car insurance because most car insurance companies use it as an indicator of risk. Statistically, drivers with good credit are less likely to file claims than drivers with bad credit. As a result, insurance companies typically assign lower rates to people with the best credit scores.

In most states, car insurance companies use special credit-based insurance scores. These scores are slightly different from typical credit scores. Most credit scores range from 300 to 850, or 250 to 900, depending on the credit bureau. However, credit-based insurance scores have a wider variety of ranges. For example, the LexisNexis Attract score ranges from 200 to 997.

Before you purchase car insurance, it can be helpful to know your credit score. However, you can’t get access to your credit-based insurance score without asking an insurance agent. Credit-based insurance scores are calculated by the insurance provider, and it can differ between companies.

Why does credit score matter for car insurance?

Your credit score matters for car insurance because insurance companies use it as a factor when calculating how likely you are to file an insurance claim. In general, insurance companies prefer to cover low risk drivers because there’s a lower chance that the insurer will have to pay a settlement after a claim.

Drivers with poor credit have been found to be more likely to file an insurance claim. To compensate for the increased chance of a claim, the insurance company charges higher rates for drivers with poor credit.

States that prohibit use of credit score in insurance rating

In some states, car insurance companies are prohibited from using insurance credit scores when assigning rates. If you live in California, Hawaii, or Massachusetts, your credit score can’t be used to determine your car insurance premium. Maryland and Michigan allow limited use of credit-based insurance scores when determining rates.

How credit score impacts car insurance by state

Your credit score can have a big impact on your car insurance premium depending on where you live. The average cost of car insurance varies based on your location, and depending on your credit score, you could pay higher or lower rates than average.

For example, our rate data shows that Connecticut drivers with poor credit pay roughly twice as much as drivers with good credit, and drivers with excellent credit pay 31% less.

Worst states for car insurance for bad credit

The worst state for car insurance for drivers with bad credit is Michigan. Drivers in Michigan with poor credit pay 158% more for car insurance than drivers with good credit. Other expensive states for drivers with bad credit include New York (a 127% increase in cost) and Minnesota (a 114% increase in cost).

Best states for car insurance for bad credit

Aside from the states that prohibit the use of credit based insurance scores, the best state for drivers with bad credit to get car insurance is Washington. Washington drivers with poor credit only pay 11% more for car insurance compared to drivers with good credit. We also found that there is only a 3% difference in average premiums between Washington drivers with excellent credit and good credit. Other states with low rates for drivers with bad credit include Nevada and North Carolina (both have a 40% increase in cost).

How credit score impacts car insurance by company

Every insurance provider uses a unique algorithm for calculating car insurance premiums. One insurance company might put less weight on credit score than another company. Additionally, car insurance companies charge different rates for the same types of coverage.

Regardless of your credit score, you should compare quotes from several insurers before you purchase a car insurance policy. This will help you find the most affordable policy for your situation. To get started, you can take our short quiz to see how much you can expect to pay for car insurance.

Insurance companies that do not use credit score

If you have poor credit, you might be looking for insurance companies that do not use credit scores to calculate rates. Unfortunately, there are no specific insurance companies that don’t use credit scores. Most providers will need to run a credit check before they will underwrite a policy.

For drivers with bad credit, it can be easier to get a policy through a non-standard car insurance provider. These providers specialize in insuring high-risk drivers, which includes people with bad credit. Non-standard car insurance companies will still check your credit, but you have a greater chance of getting approved if you don’t have a great credit score.

Some of the most popular non-standard insurance companies include:

  • The General
  • Dairyland
  • Direct Auto
  • National General
  • Freeway Insurance
  • Bristol West

Frequently asked

Does getting a car insurance quote impact my credit score?

Getting a car insurance quote will not affect your credit score. When insurance companies check your credit, they typically use a soft credit inquiry, which does not show up on your credit report. You can get as many car insurance quotes as you want, and it will have no impact on your score.

Do you have to have good credit to get insurance?

You don’t have to have good credit to get approved for a car insurance policy. However, it can be harder to get car insurance if you have a very low credit score, and you can usually expect to pay more for your policy. If you can’t get approved due to your credit, you should consider applying through a non-standard car insurance company, which usually has more flexible eligibility requirements.

Can you be denied car insurance based on your credit history?

If you have a poor credit history, it’s possible that you could be denied car insurance. Drivers with bad credit often fall into the “high-risk” category. In that case, a non-standard car insurance company may be more willing to sell you a policy. Keep in mind that non-standard car insurance tends to be more expensive than standard car insurance.