How Your Credit Score Affects Your Auto Insurance Rate (and What You Can Do about It)

Most people know their credit score plays a big role when applying for a mortgage or credit card. But did you know it can also affect how much you pay for auto insurance?

While it may seem unrelated at first glance, insurance companies have found a strong correlation between credit-based insurance scores and the likelihood of filing a claim. As a result, your credit score could be silently shaping your premiums, even if your driving record is spotless.

In fact, a study by the Federal Trade Commission (FTC) found that drivers with poor credit-based insurance scores paid 91% more in premiums than those with the best scores. So, understanding how credit impacts your rate, and what you can do about it, is essential for protecting both your wallet and your financial future.

Why Credit Scores Matter to Insurers

Insurers use a version of your credit score, known as a credit-based insurance score, to predict the risk of insuring you. They’ve found that drivers with lower scores are statistically more likely to file claims and cost the company more money. According to the Consumer Federation of America, drivers with poor credit can pay as much as $1,500 more annually than those with excellent credit, even if they’ve never had an accident.

Only a few states, such as California and Massachusetts, prohibit the use of credit scores in auto insurance underwriting; but in most states, it’s a legal and common practice.

Ways to Improve Your Credit Score (and Potentially Your Premiums)

Improving your credit score is a long-term play, but it can yield dividends across your financial life, from getting better loan rates to possibly reducing your insurance costs.

Here’s how to make improvements:

• Pay bills on time – Payment history makes up 35% of your score.
• Lower your credit utilization – Aim to use less than 30% of your available credit.
• Check for and dispute errors – One in five credit reports has an error, per the FTC.
• Avoid opening too many new accounts at once – Hard inquiries can temporarily lower your score.
• Keep old accounts open – A long credit history boosts your score.

Small Changes, Big Impact

Your credit score doesn’t just influence your ability to borrow; it quietly impacts many areas of your life, including what you pay for car insurance.

The good news is you have control.

With consistent effort and financial awareness, you can improve your score and potentially lower your premiums over time. A better credit score can open doors to lower rates, stronger financial stability, and better protection for your family.

If you're unsure how your credit score may be impacting your auto insurance, contact our office. We’ll help you review your options and potentially find ways to save.