Will my credit score affect my car insurance?

Did you know car insurance companies look at your credit score when you request a policy? Insurance companies examine your credit to determine your risk. 

But how much is car insurance based on credit? Don’t worry – we’re here to help. 

Our guide explains how your credit score affects auto insurance rates and why your credit score is considered. 

Continue reading to learn more about credit-based car insurance. 

Will my credit score affect my car insurance?

Yes, it will. Your credit score (often called FICO score or credit history) impacts your auto insurance rates. Insurance correlates credit score to your risk of filing car insurance claims. 

For example, a driver with excellent credit could pay up to 35% less for insurance because their credit score is connected to lower risks of getting into an accident or filing claims. 

Drivers with fair and poor credit have the opposite effect. Therefore, car insurance companies raise rates higher than average. 

What is the average cost of car insurance based on credit scores?

Different credit levels produce various auto insurance rates. Higher credit scores generate more affordable insurance rates, but low credit scores correlate to expensive rates. 

Let’s examine the average cost of full coverage insurance based on credit scores. 

Bad credit can double car insurance rates. But, good and fair credit can raise your rates by $16 to $31. 

How much is credit-based car insurance in each state?

Where you live is another significant factor that affects your insurance. The same credit score in one state could result in a very different rate in another state. 

Let’s look at a table that shows how credit levels affect various states. 

Maine is the most affordable state for credit-based insurance across all credit levels, but Florida and Louisiana are the most expensive states. 

What are the cheapest car insurance companies based on credit history? 

Insurance companies review your credit history to determine your risk. The better your credit score, the better your chances are of securing cheap auto insurance. 

But which companies have the most affordable rates based on credit? Let’s look at a few estimates to find out. 

State Farm, Erie Insurance, and Farm Bureau Insurance have the cheapest auto insurance for drivers with good credit. Meanwhile, Geico and Nationwide have the most affordable rates for drivers with bad credit. 

Try shopping around with smaller insurance companies if you can’t find cheap coverage through these companies. 

What states don’t allow credit-based insurance?

Not all states allow insurance companies to use credit scores to determine auto insurance rates. Check out the list below to see which states don’t allow credit-based car insurance rates:

• California
• Hawaii
• Maryland
• Massachusetts
• Michigan
• Oregon
• Utah

Each state has different rules on how insurance companies can use credit. Occasionally, you should check your insurance policy to see if anything has changed, particularly at renewal. 

How can you get cheaper insurance rates with bad credit?

There are multiple methods you can use to get more affordable rates. Check out these four tips to learn how:

• Improve your credit score. When your credit score goes up, you can get cheaper rates. 
• Maintain a clean driving record. You can save at least 20% on car insurance rates if you don’t have any accidents or traffic violations on your driving record.
• Use your VIN. Your VIN can show the insurance company features that could lower your auto insurance rates. 
• Get good grades. Students can help their parents or legal guardians get cheaper rates by maintaining a high GPA (3.0 or better). 

Did we miss anything? Ask the insurance company about other car insurance discounts and stack as many deals as possible. 

Is liability-only car insurance more affordable?

Yes, it is. Liability insurance is 53% cheaper than full coverage insurance on average. However, liability coverage doesn’t provide coverage for accidents where you’re at fault in a car accident. 

Can insurance quotes affect your credit score?

No, it shouldn’t. Insurance quotes have a soft pull on your credit. That means auto insurance companies look at your credit report to see basic information about your credit history.

Most insurance companies don’t use hard pulls on your credit. A hard pull is an in-depth credit report that shows more information and lowers your credit score slightly. 

How do you improve your credit score?

We found four ways that can help improve your credit. Here’s what you could do to improve your credit score:

• Make payments on time. Pay any debts on time to improve your credit.
• Pay off credit card debt. Make payments on time and pay off balances in full as soon as possible.
• Have multiple types of credit. Keep diverse credit types, like loans and credit cards.
• Create a longer credit history. A long credit history shows you’re more experienced managing your credit over time.

Don’t forget to let your insurance company know that you’ve improved your credit. Bear in mind that your insurance company also looks at your claims history. 

Your insurance history shows how many claims you’ve made with previous insurance companies. Having no insurance history can also drive up your rates. 

How Credit Score Affects Car Insurance: The Bottom Line

Most states allow auto insurance companies to use your credit score to determine your risk. If you have bad credit, you’ll pay more for car insurance. However, drivers with good credit have cheap car insurance rates. Poor credit doesn’t last, so do whatever you can to improve your credit and get more affordable rates.