Once your provider has calculated your credit-based insurance score, they’ll use it—along with other factors, like your driving record, age, and claims history—to help

calculate your car insurance rates

Why your credit score? According to

a report made to Congress

by the Federal Trade Commission (FTC), drivers with poor credit are more likely to make an insurance claim, meaning they pose a higher financial risk to insurance providers.2

How your credit score affects your rates

While your credit score isn’t the only factor your insurance company will take into account when determining your rates, a report by the Consumer Federation of America (CFA)3 demonstrates just how much your rates are affected by your credit score:

Drivers with fair credit (601–699) pay 49% more for car insurance than drivers with excellent credit (700+).

Drivers with poor credit (<600) pay 44% more than drivers with fair credit and 115% more than drivers with excellent credit.

Drivers with poor credit face average insurance premiums of $1,012 annually for basic coverage

As a general rule, auto insurance providers prefer drivers with a credit score of 750 or higher. If that’s not you, working on your credit can go a long way toward lowering your insurance rates. To illustrate this point, here are the average monthly insurance rates offered to drivers with various credit scores:

Credit score	State minimum coverage	Full coverage
Under 600	$65	$145
601-699	$59	$132
700+	$57	$121

The best car insurance providers for drivers with poor credit

Different insurance companies use different algorithms to determine their rates and, therefore, some providers will offer better insurance quotes to people with poor credit than others. According to data from the Consumer Federation of America, the three insurance providers who offer the lowest average increases for drivers with fair or poor credit are:

Nationwide

: Policyholders with poor credit pay just 57% more than drivers with excellent credit and 16% more than drivers with fair credit scores.

Allstate

: Policyholders saw an 89% increase from excellent to poor credit and 42% from excellent to fair credit.

GEICO

: Coming in third with an average increase of 91% from excellent to poor credit, GEICO still offers more affordable options to drivers with poor credit compared with other providers.

To help you better understand credit-based insurance rates, here are the average rate increases offered by different insurance providers:

Provider	Excellent to fair	Fair to poor	Excellent to poor
Allstate	42%	33%	89%
GEICO	40%	36%	91%
Farmers	45%	44%	109%
Nationwide	35%	16%	57%
Progressive	64%	51%	148%
State Farm	79%	82%	225%
Travelers	65%	56%	157%
USAA	31%	47%	92%

Some states are phasing out credit-based insurance scores

In just four states—

, and

—the use of credit-based insurance scores to determine premiums is currently prohibited.

However, some other states are starting to follow suit, too. Some recent efforts to reform the use of credit in auto insurance include:

Colorado State Bill 21-169 (SB 21-169)

: This bill, signed into law in 2021, is a sweeping overhaul of the insurance industry aimed at protecting consumers from discrimination. 4

Maryland

: In 2022, two Maryland legislators proposed bills to outlaw the use of credit in auto insurance underwriting, but neither bill passed.

In addition to these state-level bills, a group of Congresspeople has recently proposed the Prohibit Auto Insurance Discrimination (PAID) Act (

H.R. 3693

). This bill would prohibit insurance companies from calculating rates based on credit as well as: 6

Gender

Education level

Occupation

Employment status

Homeownership

ZIP code

Marital status

The PAID Act is currently still under review in Congress.

How to improve your credit-based insurance score

If you’re looking for a better rate on your insurance policy, there are several things you can do to improve your credit-based insurance score for lower premiums. Here are a few of them:

Credit cards can improve your credit score as long as you maintain low credit utilization.

If you have an auto loan or other regular loan payments, make regular payments to maintain good credit. If you’re having difficulty making payments, talk to your lender about refinancing your loan.

Try not to open any additional lines of credit, as taking on more debt can lower your credit score.

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FAQ

What is a car insurance premium?

Your car insurance premium is the amount of money you pay your auto insurance company for your coverage. You’ll also hear the term “insurance premium” applied to other types of insurance, such as renters insurance,

homeowners insurance

, and life insurance.

Is a credit-based insurance score the same as a regular credit score?

A credit-based insurance score is different from a FICO credit score because insurance companies weigh different aspects of your credit information differently. Your payment history and past credit performance matter more on a credit-based insurance score, while your credit mix matters less.

Is it legal for insurance companies to use credit scores in determining insurance rates?

In all states except

, and

, car insurance companies can legally use your credit information to determine your insurance risk.

How do you get a copy of your credit report?

To get a free credit report, you can visit the federally authorized site,

annualcreditreport.com

, and enter your information. This will help you understand what your insurance provider sees in your profile.

Meet our experts

Liz Jenson

Liz Jenson is an insurance writer who specializes in general automotive and insurance topics. Liz’s mission is to produce informative and useful content to help car owners make smart choices when buying cars and car insurance. Since joining Jerry in 2021, Liz has written nearly 4,000 long- and short-form articles on topics including state-specific insurance recommendations, common car insurance questions, and deep dives into vehicle model details.

Before they came to Jerry, Liz was a full-time student at Indiana University, Bloomington working on a double major in English and French.

Sarah Gray

Licensed Insurance Agent — Expert Insurance Writer and Editor

Sarah Gray is an insurance writer with nearly a decade of experience in publishing and writing. Sarah specializes in writing articles that educate car owners and buyers on the full scope of car ownership—from shopping for and buying a new car to scrapping one that’s breathed its last and everything in between. Sarah has authored over 1,500 articles for Jerry on topics ranging from first-time buyer programs to how to get a salvage title for a totaled car.

Prior to joining Jerry, Sarah was a full-time professor of English literature and composition with multiple academic writing publications.

SOURCES

https://www.ftc.gov/sites/default/files/documents/reports/credit-based-insurance-scores-impacts-consumers-automobile-insurance-report-congress-federal-trade/p044804facta_report_credit-based_insurance_scores.pdf

https://consumerfed.org/wp-content/uploads/2023/07/Official-CFA-Credit-Score_2023-FINAL-REPORT.pdf

https://doi.colorado.gov/for-consumers/sb21-169-protecting-consumers-from-unfair-discrimination-in-insurance-practices

https://www.congress.gov/bill/116th-congress/house-bill/3693/text?q=%7B%22search%22%3A%5B%22consumer%22%5D%7D&r=16&s=1