How Does Your Credit Score Affect Auto Insurance Rates?
Poor credit raises rates by 88% compared to having good credit.
Your credit score can impact your car insurance rate. A higher credit score decreases your car insurance rate with almost every insurance company and in most states. Getting a quote, however, does not affect your credit.
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How much does your credit rating affect insurance rates?
Drivers with poor credit pay $144 per month more for full coverage than those with good credit, on average.
Car insurance rates for drivers with poor credit could vary by more than $200 per month, depending on which company you choose.
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For example, Geico has the cheapest widely-available car insurance for drivers with poor credit. Full coverage from Geico costs $258 per month for drivers with a bad credit score.
The most expensive company, State Farm, charges $471 per month for the same coverage.
Bad credit car insurance rates in your state
Insurance companies don't all view your credit score the same way. Each company has slightly different ranges that they base car insurance rates on. So, a "good" score with one company may be considered "average" or "poor" elsewhere.
How does credit affect car insurance rates?
Your credit score has a major effect on car insurance prices. The majority of insurance companies use credit scores as part of how they determine what you pay for coverage.
There are five factors that affect your credit score, also called a FICO Score. These are all related to your borrowing history and current debt situation.
- Payment history: 35%
- Amount owed: 30%
- Length of credit history: 15%
- Mix of credit types: 10%
- New credit: 10%
Credit scores range from 300 to 850. Companies typically divide scores into several tiers.
Credit score tiers by FICO Scores
Tier | FICO Score |
|---|---|
| Excellent | 800-850 |
| Very good | 740-799 |
| Good | 670-739 |
| Fair | 580-669 |
| Poor | 300-579 |
However, it's not as simple as a certain score matching a certain rate. Insurance companies use your full credit report to determine an "insurance score."
A credit-based insurance score doesn't measure how creditworthy you are. Instead, it measures how risky you are from an auto insurance claim perspective, based on your creditworthiness.
How much your score affects your rates varies between states. Four states — California, Hawaii, Massachusetts and Michigan — ban companies from using your credit report to determine insurance rates. Instead, companies in these states base rates on your driving record, location and other characteristics.
You may also pay more for insurance if you don't have a credit history. This is often the same as having poor credit, from an insurance company's perspective.
Some states, including New Jersey and Rhode Island, don't allow companies to charge you more for a lack of credit history. So, you may be better off with no credit history rather than a poor one.
Worst states for drivers with bad credit
Poor credit raises rates the most for drivers in Washington, D.C., with a rate two and a half times higher than average.
There are eight other states where poor credit more than doubles your rates, including New York, New Jersey, Texas and Florida.
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Washington has the smallest increase in rates for drivers with poor credit, at 23%.
Monthly full coverage rates by state
State | Good credit | Poor credit | Difference |
|---|---|---|---|
| Alabama | $165 | $291 | 76% |
| Alaska | $136 | $239 | 76% |
| Arizona | $224 | $409 | 83% |
| Arkansas | $157 | $292 | 86% |
| California | $156 | $156 | n/a |
Do insurance companies check your credit?
Car insurance companies almost always check your credit when you buy a new policy.
Every major insurance company uses your credit history in some way, according to a report from the Federal Trade Commission.
Insurance companies check your credit because they believe drivers with poor credit tend to file more claims. Because these drivers will likely use their insurance more, they're more expensive for insurance companies to cover.
California, Hawaii, Massachusetts and Michigan don't allow insurance companies to use credit to determine car insurance rates.
Does getting a car insurance quote affect your credit score?
Getting a car insurance quote should not affect your credit score.
Car insurance companies do a "soft pull" when you get a quote, which doesn't influence your credit score. In contrast, a "hard pull" credit check impacts your credit score.
- Soft pulls only check some basic info and have no impact on your credit score.
- Hard pulls provide a full credit history and slightly lower your credit score for a short time. For example, If you apply for multiple loans in a short period of time, the buildup of hard pulls can lower your score.
Frequently asked questions
Which car insurance companies check your credit?
Every major car insurance company checks your credit before offering a binding quote. That includes Geico, State Farm, USAA, Progressive, Allstate and Liberty Mutual. Only a few insurance companies do not check your credit.
Does credit score affect car insurance rates?
Yes. A higher or lower credit score can have a big impact on your insurance rate. Poor credit increases full coverage rates by 86% compared to good credit.
Does getting insurance quotes affect credit?
No, getting an auto insurance quote does not affect your credit. Insurance companies check your credit with a soft pull. A soft pull does not provide a full credit history and does not impact your score.
Does car insurance affect my credit score?
Getting car insurance should not affect your credit. If you miss payments, the insurance company might report that to credit agencies, which could impact your credit score.
Does changing car insurance affect credit score?
No. Changing insurance companies or policies does not have any effect on your credit score.
Methodology
To determine how bad credit affects car insurance rates, ValuePenguin collected quotes from ZIP codes in all states that use credit scores as part of calculating insurance rates. Quotes are for a 30-year-old male driver with a 2015 Honda Civic EX and a clean driving record.
Rates are for a full coverage policy with higher liability limits than required in each state, along with comprehensive and collision coverage.
- Bodily injury liability: $50,000 per person; $100,000 per accident
- Property damage liability: $25,000 per accident
- Uninsured and underinsured motorist liability: $50,000 per person; $100,000 per accident
- Personal injury protection: Minimum required by state
- Comprehensive and collision coverage: $500 deductible
Insurance rate data came from publicly sourced insurance company filings collected by Quadrant Information Services. Quotes should be used only for comparative purposes only. Your own quotes will be different.
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