How Your Credit Score Affects Car Insurance Rates: The 118% Premium Gap Explained (2026)
In 47 states, car insurance companies use a credit-based insurance score to set your premium. Drivers with poor credit pay 80% to 118% more than those with excellent credit. That gap translates to $1,400/year or more in extra premium. This page explains the exact premium impact, which states ban credit scoring, which insurers are most lenient, and how to improve your insurance score.
Updated 16 April 2026
Premium by Credit Tier (Full Coverage, Clean Record)
| Credit Tier | Avg Annual Premium | Monthly | Increase vs Excellent |
|---|---|---|---|
| Excellent (800+) | $1,200 | $100 | Baseline |
| Good (670-799) | $1,440 | $120 | +15% to 25% |
| Fair (580-669) | $1,920 | $160 | +40% to 70% |
| Poor (below 580) | $2,616 | $218 | +80% to 118% |
Source: The Zebra, Bankrate, Quadrant Information Services 2025 data. Rates for 35-year-old, clean record, 100/300/100 coverage.
States Where Credit Does Not Affect Your Rate
Full Ban (3 States)
These states prohibit insurers from using credit scores in any way to determine auto insurance premiums:
- California - Proposition 103 (1988) bans credit-based pricing
- Hawaii - Banned since 2009
- Massachusetts - Banned since 2011
Restrictions (4 States)
These states restrict but do not fully ban credit use:
- Michigan - Cannot use as sole factor for denial
- Oregon - Cannot be sole reason for non-renewal
- Maryland - Limited use, cannot use for cancellation
- Utah - Requires disclosure of credit use
If you live in California, Hawaii, or Massachusetts, your credit score has zero impact on your car insurance rate. In the other 47 states, credit is typically the 4th most impactful factor after driving record, location, and age.
Cheapest Insurers for Drivers with Bad Credit
USAA
Military only, least credit-sensitive
Nationwide
Most credit-lenient among major insurers
Geico
Credit impact lower than industry average
Erie
Available in 12 states + DC only
Progressive
Nationwide, Snapshot can offset credit
Rates for drivers with credit score below 580, clean driving record, 100/300/100 coverage.
Credit-Based Insurance Score vs FICO Score
The score insurers use is not your FICO score. It is a separate credit-based insurance score that uses similar data but weighs factors differently. Both scores pull from your credit report, but they focus on different risk indicators.
FICO Score (Lending Risk)
- Payment history (35%)
- Amounts owed (30%)
- Length of credit history (15%)
- New credit (10%)
- Credit mix (10%)
Insurance Score (Claims Risk)
- Outstanding debt (heavier weight)
- Length of credit history (heavier weight)
- Payment history
- Number of new applications
- Credit mix
- Does NOT consider income or employment
6 Steps to Improve Your Insurance Score
Pay down revolving credit balances (1 to 3 months for score impact)
Reducing credit utilization below 30% has the fastest impact on both FICO and insurance scores.
Dispute credit report errors (30 to 45 days per dispute)
Check annualcreditreport.com for free reports. About 1 in 5 reports contain errors that could affect your score.
Keep old accounts open (Immediate (do not close))
Closing old credit cards shortens your average account age and increases utilization ratio. Keep them open even if unused.
Avoid new credit applications (3 to 6 months)
Each hard inquiry reduces your score slightly. Space out applications by at least 6 months.
Set up automatic payments (Ongoing)
Payment history is the single largest factor. Even one late payment stays on your record for 7 years.
Become an authorized user (1 to 3 months)
Being added to a family member's old, high-limit credit card can boost your credit length and lower utilization.
Improving from poor to fair credit typically takes 6 to 12 months and can save $300 to $600/year on car insurance. Improving from fair to good takes another 12 to 24 months and saves an additional $200 to $400/year.
FAQ
Does checking car insurance affect my credit?
No. Insurance quote checks are soft inquiries that do not impact your credit score. Only hard inquiries from loan and credit card applications affect your score. You can get unlimited insurance quotes safely.
Which states ban credit scoring for insurance?
California, Hawaii, and Massachusetts fully ban credit-based insurance pricing. Michigan, Oregon, Maryland, and Utah have partial restrictions. In the other 43 states, credit is a standard rating factor.
Can I get car insurance with no credit history?
Yes, but expect to pay 10% to 25% more than someone with established good credit. Insurers treat 'no credit' as moderate risk (better than bad credit, worse than good). USAA and Nationwide are among the most lenient for thin credit files.