How Your Credit Score Affects Car Insurance Rates
Your credit score is the second biggest factor in determining your car insurance premium—surpassed only by your driving record. Drivers with poor credit (below 600) pay an average of $1,154 more per year than drivers with excellent credit (750+) for identical coverage.
This isn't arbitrary. Insurers have decades of actuarial data showing that lower credit scores correlate with higher claim frequency and severity. It's legal in 47 states (California, Hawaii, and Massachusetts prohibit it).
| Credit Score Range | Credit Tier | Avg Annual Premium | vs Excellent Credit |
|---|---|---|---|
| 750–850 | Excellent | $1,421 | — |
| 700–749 | Good | $1,618 | +$197 (+14%) |
| 650–699 | Fair | $1,923 | +$502 (+35%) |
| 600–649 | Below Average | $2,287 | +$866 (+61%) |
| 550–599 | Poor | $2,689 | +$1,268 (+89%) |
| Below 550 | Very Poor | $3,156 | +$1,735 (+122%) |
National averages for full coverage (100/300/100 liability, $500 deductible) on a 2020 Honda Civic. Rates vary significantly by state, carrier, and individual factors.
Compare Rates for Your Credit Profile
Some carriers penalize poor credit less than others. Compare quotes to find the best rate for your score:
Progressive Quote GEICO Quote State Farm QuoteWhat Is a "Credit-Based Insurance Score"?
Insurance companies don't use your standard FICO score—they use a specialized credit-based insurance score developed by LexisNexis, Equifax, or TransUnion specifically for insurance risk prediction. It weighs factors differently than a lending credit score:
| Factor | Weight in Insurance Score | Weight in FICO Score |
|---|---|---|
| Payment history | ~40% | 35% |
| Outstanding balances | ~30% | 30% |
| Length of credit history | ~15% | 15% |
| New credit inquiries | ~10% | 10% |
| Credit mix | ~5% | 10% |
Key difference: Insurance scores focus more heavily on payment history and balances than a lending score. A single missed payment 2 years ago can still affect your insurance rates today.
Which Carriers Penalize Poor Credit the Most (and Least)?
Not all insurers weight credit equally. Some carriers use credit as a primary pricing factor; others treat it as a minor adjustment. Shopping around matters enormously for drivers with below-average credit.
| Carrier | Rate with Excellent Credit | Rate with Poor Credit | Increase |
|---|---|---|---|
| Progressive | $1,398 | $2,456 | +75% |
| Allstate | $1,567 | $2,987 | +91% |
| GEICO | $1,312 | $2,234 | +70% |
| State Farm | $1,456 | $2,123 | +46% |
| Nationwide | $1,534 | $2,267 | +48% |
| Liberty Mutual | $1,623 | $3,312 | +104% |
| Lemonade | $1,245 | $1,987 | +60% |
Rates for a 35-year-old driver in Texas with clean driving record and 2020 Toyota Camry. Rates are illustrative—get quotes for your exact profile.
Key insight: State Farm and Nationwide penalize poor credit the least (46-48% increase). Liberty Mutual and Allstate penalize poor credit the most (91-104% increase). If you have poor credit, State Farm is often the best choice among major carriers. See full carrier comparison →
States Where Credit Cannot Be Used for Insurance
Three states ban the use of credit scores in insurance pricing:
- California: Prohibited since Proposition 103 (1988)
- Hawaii: Banned for auto insurance since 1997
- Massachusetts: Prohibited for auto insurance
In these states, your driving record, age, vehicle, and location drive pricing—but not credit. Drivers in California, Hawaii, and Massachusetts with poor credit pay the same as drivers with excellent credit, all else equal.
Several other states have restrictions: Maryland, Michigan, and Oregon limit how much insurers can weight credit in their pricing models.
How Much Can You Save by Improving Your Credit?
Improving your credit score directly translates to lower insurance premiums. Here's how much you can save by moving up a tier:
| Credit Improvement | Annual Premium Change | Savings Over 3 Years |
|---|---|---|
| Very Poor → Poor (540→580) | -$467/year | $1,401 |
| Poor → Fair (580→650) | -$766/year | $2,298 |
| Fair → Good (650→700) | -$305/year | $915 |
| Good → Excellent (700→750) | -$197/year | $591 |
| Very Poor → Excellent | -$1,735/year | $5,205 |
Moving from Very Poor to Excellent credit saves over $5,200 in insurance costs over 3 years—on top of the savings on loan rates, credit card APRs, and rental deposits.
Find the Best Rate for Your Credit Score
Compare quotes from carriers that are most lenient with poor credit:
Try Quote Calculator State Farm (Best for Poor Credit)5 Steps to Lower Your Insurance Rate by Improving Credit
1. Pay Bills On Time (Biggest Impact)
Payment history is 40% of your insurance score. A single 30-day late payment can drop your score 50-100 points. Set up autopay for every bill. If you've missed payments, the damage fades after 2 years—most negative items fully drop off after 7 years.
2. Pay Down Credit Card Balances
Aim for under 30% credit utilization (balance ÷ credit limit). Under 10% is ideal for maximum score impact. Paying down a maxed-out card from 90% to 30% utilization can increase your score 50-80 points within 30-60 days.
3. Don't Close Old Accounts
Length of credit history accounts for 15% of your insurance score. Closing an old card shortens your average account age and can drop your score. Keep old accounts open with a small recurring charge.
4. Limit New Credit Applications
Each hard inquiry drops your score 5-10 points. Avoid applying for new credit (cards, loans) in the 6 months before your insurance renewal date. Multiple applications in a short window compound the damage.
5. Dispute Credit Report Errors
1 in 5 credit reports contains errors—accounts that aren't yours, incorrect late payment records, or outdated balances. Get your free reports at AnnualCreditReport.com and dispute any errors with TransUnion, Experian, and Equifax. Corrected errors can boost your score 20-100+ points. More ways to lower your premium →
Other Strategies When You Have Poor Credit
Shop Every 6 Months
As your credit improves, your rate should drop at renewal. But some carriers don't automatically re-price downward—you may need to get new quotes from competitors to capture the savings. Re-quote every 6-12 months as your credit improves.
Ask About Credit-Neutral Carriers
Some smaller regional insurers use credit less aggressively than national carriers. Erie Insurance, Auto-Owners, and regional mutuals often have better rates for drivers with fair credit than the big nationals.
Use Telematics to Offset Credit
If you're a safe driver, telematics programs (Progressive Snapshot, State Farm Drive Safe & Save) can deliver 15-30% discounts based on driving behavior—partially offsetting the credit penalty. Safe driving can't fully close the gap with excellent credit, but it helps.
Credit Score and Car Insurance: FAQ
Does checking my credit for insurance quotes hurt my score?
No. Insurance companies use "soft pulls" that don't affect your credit score. Only hard pulls (loan applications, credit card applications) lower your score.
Can I ask an insurer to not use my credit score?
In most states, no—credit use is legal and standard. In California, Hawaii, and Massachusetts, it's prohibited and isn't used at all. In other states, some carriers offer "non-credit" policies, but these typically cost more than a standard policy for drivers with good credit.
How often do insurers re-check my credit score?
Most carriers check at policy issuance and at each renewal (every 6 or 12 months). As your credit improves, your premium should decrease at renewal. However, some carriers only re-check when you request a rate review.
Does a bankruptcy affect my car insurance?
Yes, significantly. A Chapter 7 bankruptcy drops most credit scores 150-200 points and stays on your record for 10 years. Expect 60-100% higher insurance rates immediately after filing. Rates gradually improve as the bankruptcy ages and your score recovers.
Is it worth switching carriers to get a better rate with poor credit?
Absolutely. Carriers vary by 40-100% in how they penalize poor credit. Shopping 5+ carriers when you have below-average credit can save $800-1,500/year. See cheapest carriers by state →
Related Guides
- 12 Ways to Lower Your Car Insurance Premium
- Best Car Insurance Companies Ranked
- Cheapest Car Insurance by State 2026
- How Age Affects Car Insurance Rates
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