Many drivers are surprised to learn that their credit history can influence what they pay for car insurance. In most states, insurers use something called a credit-based insurance score as one factor in pricing. It is not the same as the credit score a lender uses, but it draws on similar information. Here is what you need to know.
What is a credit-based insurance score?
A credit-based insurance score is a number insurers use to help predict the likelihood that a policyholder will file a claim. Insurers have found a statistical correlation between certain credit patterns and claim frequency, so they factor it into rates where the law allows. It typically considers your payment history, outstanding debt, length of credit history, and similar factors.
Where it is and is not allowed
The use of credit in insurance pricing is regulated at the state level. A few states — including California, Hawaii, and Massachusetts — prohibit or heavily restrict its use for auto insurance. In the majority of states, however, it remains a permitted rating factor. Rules can change, so check your state’s current regulations if this matters to you.
How much can it matter?
Credit is only one of many factors, alongside your driving record, vehicle, location, and coverage choices. But in states where it is used, moving from poor to excellent credit can make a meaningful difference in your premium. It is one of the more impactful factors that is at least partly within your control over time.
Ways to improve your standing over time
- Pay every bill on time — payment history is the single biggest factor
- Keep credit card balances low relative to your limits
- Avoid opening several new accounts in a short period
- Keep older accounts open to lengthen your credit history
- Check your credit reports for errors and dispute anything inaccurate
What to do right now
Improving credit takes time, but comparison shopping does not. Because each insurer weighs credit differently, the carrier that penalizes your credit the most may not be the one you are with — and another may barely factor it in. Comparing quotes is the fastest way to find a carrier whose formula happens to favor your profile.
On EzRatesAuto you can compare illustrative estimates from 20+ carriers side by side. Use it to see the spread, then confirm the final price with the carrier — which may run its own credit and underwriting checks before issuing a policy.