How Your Credit Score Affects Your Car Insurance Rate

It surprises many drivers, but in most states your credit history can influence your car insurance premium more than a speeding ticket would. Insurers use something called a credit-based insurance score. Here is what it is and how to improve yours.

What Is a Credit-Based Insurance Score?

It is a score derived from elements of your credit history that insurers have found to correlate with the likelihood of filing claims. It is not identical to the credit score a lender sees, but it draws on similar data — payment history, outstanding debt, and length of credit history.

Where It Applies

Most states permit the use of credit-based insurance scores, but a few — including California, Hawaii, Massachusetts, and Michigan — restrict or prohibit it for auto insurance. Rules vary, so your location matters.

How to Improve Your Score

• Pay every bill on time — payment history carries the most weight
• Keep credit card balances low relative to your limits
• Avoid opening several new accounts at once
• Check your credit report for errors and dispute them

Shop Around Regardless

Every insurer weighs credit differently. A carrier that penalizes your score heavily may be the wrong fit, while another barely factors it in. Comparing quotes across carriers is the fastest way to find the one that rates you most favorably.