How Your Credit Affects Car Insurance Rates

Does my credit really change my car insurance price?

In most states, yes. Your insurer can pull your credit file, turn it into a score and use that score to set your price. You can have a spotless driving record and still pay more because of it.

How much more? That depends on the company, and the spread is wide. One analyst’s nationwide average puts drivers with poor credit about two-thirds above drivers with good credit. By insurer, the gap runs from under 50% to several times the price. We show the numbers below.

A few states do not allow this at all. California, Hawaii, Massachusetts and Michigan bar credit from car insurance pricing. Utah, Maryland and Oregon limit it hard. In the rest, the law gives you rights instead of a ban. You are owed reasons in writing, a free copy of your credit report and a way to ask for a second look.

This page explains the score, the state rules, the price gap and your options. If you came here with a high quote in hand, jump to the steps near the end.

What is a credit-based insurance score?

It is a number built from your credit report that guesses how likely you are to file claims. It is not the score your bank sees. A lender wants to know if you will repay a loan. An insurer wants to know if you will cost it money. The federal government’s 2007 study says insurers use these scores to estimate claims, not to guess whether you will pay your premium.

The ingredients are the same ones in a normal credit score. FICO’s breakdown for its insurance score, as published by the District of Columbia’s insurance regulator, looks like this:

• Payment history, about 40%. Late payments, collections and bankruptcies hurt most.
• Amount you owe, about 30%. High card balances compared with your limits count against you.
• Length of credit history, about 15%.
• New credit applications, about 10%.
• Mix of credit types, about 5%.

Other score makers weigh these differently, and each insurer decides what counts as a good score. Your insurance score is harder to see than your regular score, though the company that built it can sometimes tell you more. Your regular score is only a rough guide.

Many states also fence off certain inputs. Common examples are income, race, religion, ZIP code, medical bills in collections and credit checks that you did not start. Rules for people with no credit file at all vary. Washington, for example, bars insurers from denying you coverage for it but lets them charge more if their own data supports that.

Why do insurers use credit at all?

Insurers say it works, and the federal study agrees on that point. Using a large set of policy and claims records, the Federal Trade Commission found that low scores went with more claims and costlier ones. Nobody has shown why. The FTC said the evidence was not strong enough to pick an explanation.

Critics say credit is a stand-in for income and race. The FTC found real differences between groups. Black and Hispanic drivers were more likely to have the lowest scores. Using scores raised their predicted claim costs by 10% and 4.2% on average, while it lowered them for white and Asian drivers. Only a small part of that came from the scores acting as a proxy for race.

The study also found that more drivers would pay less than pay more. About 59% would see a drop and 41% a rise. Among those who pay more, the typical rise was 16%. The FTC warned that this model may overstate what insurers actually do.

Both sides have a point. The score predicts claims, and it lands harder on some groups. That is why states split. The study is from 2007, so treat its numbers as background, not as today’s prices.

Which states ban or limit credit in car insurance?

Four states ban it for car insurance. Michigan is the one that trips up many sites. A news report and one price site list only California, Hawaii and Massachusetts. The Michigan statute is plain, though. An insurer may not use a credit score to set or keep auto rates. That law took effect in June 2019.

• California. Credit is not on the short list of factors the state allows. Your driving record, yearly miles and years of experience must count most. See our California page.
• Hawaii. The state insurance division said in 2007 that the law bans credit reports in car insurance pricing and underwriting. We could not open the statute itself. See Hawaii.
• Massachusetts. Insurers may not use credit information to rate you or to decide whether to issue or renew a policy. Claims and driving records are still allowed. See Massachusetts.
• Michigan. The ban covers credit scores in auto rates and rating classes. Two price studies we read (NerdWallet and Insurance.com) still show Michigan prices that differ by credit tier, and we could not reconcile that with the statute. If a notice blames credit, ask the insurer to explain. See Michigan.

Three more states allow credit only in narrow ways:

• Utah. Insurers may use credit to give you a discount, not to raise your rate. They cannot cancel or drop you over it after 60 days. See Utah.
• Maryland. Credit can price a new car policy, but never a renewal. The swing is capped at 40% in either direction, and old credit data is limited to five years. See Maryland.
• Oregon. Once your policy has run 60 days, credit cannot be the reason to cancel or drop you. You can ask for a re-rate once a year. See Oregon.

Washington tried a ban. The insurance commissioner issued one by rule, and a court ruled in July 2022 that he had gone beyond his legal power. The state now says there is no ban. Bills to ban credit were pending in Iowa, New York, Oklahoma and Pennsylvania in April 2026, according to CNBC. We did not find a new ban enacted.

What do the other states protect?

Most states allow credit with guardrails. The details differ, but these are common:

• Credit cannot be the only reason to refuse, cancel or drop you.
• The insurer must tell you at the start that it may check credit.
• If credit hurts you, you get reasons in writing, often up to four.
• Medical collections and credit checks from insurance shopping cannot count against you in many states.
• The insurer must refresh your score every few years, often every three.
• Many states require exceptions for life events. More on that below.

Our state guides show how this works in practice for Texas, Florida, Connecticut, Virginia and Vermont.

One caution. Idaho’s insurance department rule, as NAIC describes it, gives insurers a way to show compliance by keeping the price for the best credit tier within a fixed ratio of the worst. We could not read the rule itself, so check it if you live there.

How much can poor credit cost?

There is no official price table, so these are published estimates, each for a different driver. They are not quotes for you.

Two notes on those figures. CNBC quoted an earlier NerdWallet version of the same analysis at 69%, so the number moves between updates. And NPR’s Miami case is one example, not an average. In one Chicago district NPR found gaps from 50% to over 200%.

Why do the numbers differ so much?

• Companies weigh credit differently. NPR found one major insurer leans on credit far more than another. NerdWallet’s table shows the same pattern: some insurers charge about 45% more for poor credit and others nearly four times as much.
• “Poor” is not defined the same way. NerdWallet does not publish its credit cut-offs, and the Quadrant tiers are not spelled out in the pieces we read.
• Location matters. NPR found credit counts for much more in Florida than in Idaho.
• Coverage and driver profile differ. Full coverage costs more than liability only, and a clean 40-year-old is not you.

For price levels without the credit angle, see how much car insurance costs.

What if my credit dropped for reasons outside my control?

Ask for an exception. In many states an insurer must make one when your credit was hurt by a life event. Typical events are serious illness or injury, the death of a spouse, child or parent, divorce, identity theft, a long layoff and military deployment overseas. The list varies by state.

In Texas, you send a written request. The insurer may ask for documents. It then either uses only the credit data the event did not touch or gives you a neutral score. Texas also lets you complain to the state if you think an exception was not made fairly. Florida has a similar appeal for divorce, a spouse’s death or job loss, with a decision due within 10 business days after you send papers.

Not every state requires this. We found no such exception in the Mississippi regulation text we read, and NAIC’s summary of Missouri’s rules lists none. Some insurers offer exceptions anyway, so ask.

How do I find out if credit raised my price?

Federal law requires a notice when information from a credit report helps cause a price increase. The notice must name the credit bureau and say the bureau did not make the decision. It may also have to include a credit score, but the federal definition is written around scores lenders use to predict repayment, so an insurance score may not appear. You can get a free copy of your report within 60 days and dispute anything wrong.

Many states add their own rules. Insurers often must list up to four main reasons, and a vague phrase like “poor credit” does not count in several states. If you find an error and the bureau fixes it, tell your insurer in writing. In Washington the insurer must then re-rate your policy back to its start date. Texas, Oregon and Vermont have similar fix-it rules with a 30-day deadline for the re-rate in Texas and Vermont.

An example of how this can play out

These numbers are made up for illustration. Say your car insurance renews at $1,400 a year, up from $1,050, and you made no claims. The notice says credit played a part. You were divorced eight months ago, and you missed two card payments in that rough stretch.

You pull your free report and find one account listed as late that was paid on time. You dispute it, and the bureau corrects it. You then write to the insurer with the corrected report and your divorce decree and ask for an exception.

In a state that requires exceptions, the insurer should rerun your price using credit data the divorce did not touch, or a neutral score. The result might land near $1,150. It might not drop at all, because credit is only one factor. Meanwhile you get two more quotes. One insurer that weighs credit lightly comes in at $1,090.

In Maryland, the same insurer could not have raised your renewal over credit in the first place.

What to do next

1. Find your state in the table above. If you live in California, Hawaii, Massachusetts or Michigan and a notice blames credit for a car insurance price, call your state insurance department.
2. Ask each insurer how it uses credit. Ask whether it checks other drivers in your household too. Washington’s regulator notes that insurers look at the first person named on the policy and may check others too.
3. Pull your free credit reports. Use annualcreditreport.com, the site the FTC has authorized, and look for wrong late payments, accounts that are not yours and old debts.
4. Read any adverse action notice. It should list reasons. If a life event caused the damage, send a written request for an exception with documents.
5. Ask for a re-rate when your credit improves. Oregon gives you one a year. Texas and Vermont allow one at renewal on request. Florida and Maryland have two-year reviews in some cases.
6. Compare at least three quotes. Insurers weigh credit very differently, so the cheapest for a neighbor may not be cheapest for you. Our guide to lowering your car insurance covers the other levers.
7. Build the score you can control. The District of Columbia’s insurance regulator advises paying on time and keeping card balances as low as possible.

Common mistakes

• Assuming your credit freeze hides you from insurers. Federal law lets insurers review a frozen report without lifting the freeze, according to Washington’s regulator.
• Treating your regular score as your insurance score. They share a source but are built for different jobs.
• Blaming credit for everything. Your record, miles and ZIP code also count. See how rates are calculated.
• Ignoring the notice. It tells you why you were charged more and what rights you have. Keep it.
• Waiting too long. In Oregon, a re-rate starts from the day you ask, not before. If other things are also driving your price, read our high-risk insurance guide.

Bottom line

If you live in California, Hawaii, Massachusetts or Michigan, credit should not touch your car insurance price, and a notice saying otherwise is worth a call to your regulator. If you live in Utah, Maryland or Oregon, credit has far less power than elsewhere. In the other states, expect credit to matter. Fix errors, ask for a re-rate and exceptions, and shop several insurers, because the gap between companies is often bigger than the gap between your credit tiers.

This page is general information, not legal or financial advice. Confirm the rules for your state with its insurance department.