Quick Answer: Yes, Your Credit Score Affects Your Insurance Rate — Often Significantly
In most U.S. states, insurance companies use a credit-based insurance score to help set your auto and home insurance premiums. Drivers with poor credit can pay up to 76% more for car insurance than drivers with excellent credit, according to 2026 data from NerdWallet. The good news: improving your credit score can meaningfully lower your rates over time — and shopping around with multiple carriers can save you money right now, regardless of your credit.
Key Takeaways
- Most insurers use credit scores to set auto and home insurance premiums in states where it’s allowed.
- Poor credit can cost you up to 76% more on car insurance compared to drivers with excellent credit.
- A credit-based insurance score is different from your regular credit score — but both are influenced by the same factors.
- California, Hawaii, Massachusetts, and Michigan prohibit insurers from using credit scores to set auto insurance rates.
- Improving your credit — even modestly — can reduce your insurance premium at your next renewal.
- Shopping around matters: different carriers weigh credit differently, so comparing quotes is essential.
What This Guide Covers
- What is a credit-based insurance score?
- How much does credit affect your insurance rate?
- Which states ban the use of credit scores for insurance?
- What factors make up your insurance credit score?
- How to improve your credit score and lower your premium
- How to get the best rate regardless of your credit
- Frequently asked questions
- Methodology
What Is a Credit-Based Insurance Score?
A credit-based insurance score is a number calculated by insurance companies — or third-party data providers like LexisNexis or Equifax — using information from your credit report. It is specifically designed to predict the likelihood that you will file an insurance claim, not your ability to repay a debt.
This is an important distinction. Your credit-based insurance score and your regular FICO credit score are related but not identical. They draw from the same underlying credit report data, but the weighting and calculation differ because they are predicting different things.
Insurance companies argue that statistical research consistently shows a correlation between credit history and claim frequency — meaning people with lower credit scores tend to file more claims, on average. Consumer advocates have challenged this view, arguing the practice disproportionately affects lower-income and minority communities.
Regardless of the debate, credit-based insurance scoring is currently legal and widely used in most U.S. states — which makes understanding it essential for any driver or homeowner.
How Much Does Your Credit Score Affect Your Insurance Rate?
The impact is significant. Here is a breakdown of average annual auto insurance premiums by credit tier, based on 2026 rate data:
| Credit Tier | Average Annual Premium | vs. Excellent Credit |
|---|---|---|
| Excellent (750+) | ~$1,470/year | Baseline |
| Good (670–749) | ~$1,740/year | +18% |
| Fair (580–669) | ~$2,150/year | +46% |
| Poor (below 580) | ~$2,590/year | +76% |
Averages based on national rate data. Actual premiums vary by state, carrier, driving history, and coverage level.
The difference between excellent and poor credit can amount to more than $1,100 per year on auto insurance alone — money that could be saved simply by understanding and improving your credit profile over time.
What About Home Insurance?
Credit also affects home insurance rates in most states. Homeowners with poor credit can pay up to 90% more for home insurance than those with excellent credit, according to some carrier analyses. The impact varies more widely by carrier for home insurance than for auto.
Which States Ban Credit Scores for Insurance Pricing?
A small but growing number of states prohibit insurers from using credit scores to set auto insurance premiums:
- California — banned for auto insurance
- Hawaii — banned for auto insurance
- Massachusetts — banned for auto insurance
- Michigan — banned for auto insurance
Several other states have introduced legislation to restrict or ban credit-based insurance scoring as of 2026, including Colorado and Washington, which have added restrictions on how credit can be used. If you live in one of these states, your credit score has no direct impact on your auto insurance rate — though it may still affect other types of insurance.
If you live outside these states, assume your credit score is being factored into your premium unless your insurer explicitly states otherwise.
What Factors Make Up Your Credit-Based Insurance Score?
While each insurer and data provider uses a slightly different formula, credit-based insurance scores generally weight the following factors:
| Factor | Approximate Weight | What It Means |
|---|---|---|
| Payment history | ~40% | On-time vs. late or missed payments |
| Outstanding debt | ~30% | How much of your available credit you’re using |
| Credit history length | ~15% | How long accounts have been open |
| New credit inquiries | ~10% | Recent applications for new credit |
| Credit mix | ~5% | Variety of credit types (cards, loans, etc.) |
Payment history and outstanding debt carry by far the most weight. Consistently paying bills on time and keeping credit card balances low are the two most impactful steps you can take.
How to Improve Your Credit Score and Lower Your Insurance Premium
Improving your credit score won’t lower your insurance premium overnight — insurers typically re-check credit at renewal, which is usually every six to twelve months. But the steps below can meaningfully improve your score over time and result in lower premiums at your next renewal.
1. Pay Every Bill On Time
Payment history is the single largest factor in your credit score. Set up automatic payments for at least the minimum due on every account to avoid late payments, which can drop your score significantly.
2. Reduce Your Credit Utilization
Credit utilization — the percentage of your available credit you’re using — is the second biggest factor. Aim to keep utilization below 30%, and ideally below 10%, across all cards. Paying down balances is the fastest way to move this number.
3. Don’t Close Old Accounts
Closing old credit cards reduces your total available credit and shortens your average account age — both of which can hurt your score. Keep old accounts open even if you rarely use them.
4. Limit New Credit Applications
Every time you apply for new credit, a hard inquiry is added to your report. Multiple hard inquiries in a short period can lower your score. Only apply for new credit when necessary.
5. Check Your Credit Report for Errors
Errors on credit reports are more common than most people realize. You’re entitled to a free credit report from each of the three major bureaus annually at AnnualCreditReport.com. Dispute any inaccurate negative items — removing an error can improve your score quickly.
6. Ask Your Insurer to Re-Run Your Credit
If your credit has improved significantly since your last renewal, some insurers will re-run your credit score mid-term upon request. This isn’t guaranteed, but it’s worth asking — especially if you’ve paid down significant debt or resolved a past delinquency.
How to Get the Best Insurance Rate Regardless of Your Credit
Even if your credit score is less than perfect right now, there are steps you can take to minimize its impact on your insurance costs.
Shop Multiple Carriers
This is the single most important step. Different insurance companies weight credit differently in their pricing models. A carrier that heavily penalizes poor credit may charge significantly more than one that places less emphasis on it. The only way to find out is to compare quotes side by side.
Ask About Credit-Neutral Discounts
Many insurers offer discounts that have nothing to do with credit — safe driver discounts, multi-policy discounts, low-mileage discounts, vehicle safety feature discounts, and more. Stacking these discounts can offset some of the premium impact from a lower credit score.
Consider Usage-Based Insurance
Some carriers offer telematics or usage-based insurance programs that base your rate primarily on how you actually drive — not your credit score. If you’re a safe driver with less-than-ideal credit, these programs can result in significant savings.
Raise Your Deductible
Increasing your deductible lowers your premium regardless of your credit score. Just make sure you have enough saved to cover the higher deductible in the event of a claim.
How OwlQuotes.com Helps You Find the Best Rate for Your Credit Profile
At OwlQuotes.com, comparing auto and home insurance quotes is fast, free, and completely pressure-free — regardless of your credit score. Enter your ZIP code, answer a few quick questions, and see real quotes from top carriers side by side.
Different carriers treat credit differently. Comparing quotes is the only way to make sure you’re not overpaying because of how one insurer happens to weight your credit profile. Ollie’s job is to make sure you never do.
We also help with home insurance, life insurance, renters insurance, and more — all in one place, across all 50 states.
Compare Insurance Quotes Now — Whatever Your Credit Score
It takes about 60 seconds to compare auto or home insurance quotes from top carriers. Find out which insurer gives you the best rate for your credit profile — before your next renewal.
Frequently Asked Questions
Do all insurance companies use credit scores?
Most do, but not all. Some smaller carriers and specialty insurers do not use credit-based scoring. Additionally, a handful of states prohibit the practice for auto insurance. Shopping around is the best way to find carriers that may weight your credit more favorably.
Does checking my credit score hurt my insurance rate?
No. When you check your own credit score, it’s a “soft inquiry” that has no impact on your score or your insurance rate. Only “hard inquiries” — triggered when you apply for new credit — can temporarily lower your score.
How often do insurers check my credit score?
Most insurers check your credit score at policy inception and then again at each annual renewal. Some check every six months. Your rate can go up or down at renewal based on changes to your credit profile.
Can I be denied insurance because of my credit score?
In most states, insurers cannot deny you coverage solely because of your credit score, but they can charge higher rates. Some high-risk insurers specialize in coverage for drivers with poor credit or driving records.
What states don’t allow credit scores for insurance?
California, Hawaii, Massachusetts, and Michigan currently prohibit insurers from using credit scores to set auto insurance rates. Several other states have added restrictions as of 2026. Check your state’s department of insurance for the latest rules.
How long does it take for credit improvements to lower my insurance rate?
Most insurers re-check your credit at your annual renewal. Significant credit improvements made in the six to twelve months before your renewal can result in a lower premium. Some insurers will re-run credit mid-term upon request if your score has improved substantially.
Is a credit-based insurance score the same as my FICO score?
No. They draw from the same credit report data but are calculated differently because they predict different things. Your FICO score predicts the likelihood of repaying debt; your credit-based insurance score predicts the likelihood of filing a claim.
Methodology
Premium estimates by credit tier in this guide are based on 2026 national average rate data from NerdWallet, The Zebra, and Bankrate. Credit factor weightings reflect general industry averages and may vary by insurer and data provider. State-specific credit scoring rules reflect regulations in effect as of June 2026 — consult your state’s department of insurance for the most current information. This guide is for informational purposes only and does not constitute insurance, financial, or legal advice.
About OwlQuotes.com
OwlQuotes.com is a free online insurance comparison marketplace helping consumers compare quotes from top-rated carriers across all 50 states. Our content uses data from the Insurance Information Institute (III), the National Association of Insurance Commissioners (NAIC), and other trusted industry sources to keep our guides accurate and up to date.
Ready to find out if your credit score is costing you more than it should on insurance? Visit our Auto Insurance and Home Insurance pages to compare quotes from top carriers and find the coverage that fits your budget — whatever your credit looks like.