How Insurance Companies Use Your Credit-Based Insurance Score

Your credit score could raise your auto insurance rates by 115% or more—even if you have a perfect driving record.
Written by R.E. Fulton
Edited by Amy Bobinger
Reviewed by Brice Regling
Roughly two-thirds of Americans aren’t aware that their credit score can affect their
auto insurance rates
—but it’s actually one of the biggest factors insurers look at when setting premiums. 
Even with a perfect driving record, a poor credit score could raise your rates more than a DUI. Some states are trying to change this system, but in most places in the U.S., it’s still legal for insurance companies to base your car insurance rates on your credit. 

How insurance companies use credit to raise car insurance rates

All insurance companies look at a wide range of different factors when
calculating car insurance rates
. Driving record, age, and insurance claims history are three of the most important—but credit history can have an outsized impact on the amount Americans pay for car insurance. 
According to recent research by the Consumer Federation of America (CFA), drivers with poor credit-based insurance scores pay substantially higher premiums than drivers with good credit—even if they have a spotless driving record. 1
card icon

Credit scores and car insurance: Quick facts

  • Drivers with fair credit (710-740) pay 49% more for car insurance than drivers with excellent credit (823+). 
  • Drivers with poor credit (524-577) pay 44% more than drivers with fair credit and 115% more than drivers with excellent credit. 
  • California, Hawaii, and Massachusetts are the only states that ban insurers from using credit to set rates. 
  • 66% of Americans aren’t aware that their credit scores are used to set their insurance rates. 

What is a credit-based insurance score? 

Instead of a standard FICO credit score from one of the three consumer credit reporting companies (Equifax, TransUnion, and Experian), insurance companies use a unique score known as a “credit-based insurance score.” Insurance scoring models put more emphasis on payment history and less on the types of credit you use.
Standard credit score
Credit-based insurance score
Payment history/past credit performance
Outstanding debt
Length of credit history
New credit
Credit mix
Why the insurance industry cares about credit
Research by the Federal Trade Commission (FTC) has shown that drivers with lower credit scores have a higher rate of insurance claims. In other words, a low credit score looks like an insurance risk to carriers.

What’s a good credit score for car insurance?

Auto insurance companies prefer customers with credit scores over 750. 
The CFA’s research shows that: 
  • Drivers with poor credit (below 578) have significantly higher insurance premiums
  • Drivers with fair credit (710 to 740) still pay more for insurance than drivers in the excellent credit range
If your credit is in the mid-500s, work on bringing it up to the 700 range. If your credit is hovering in the low 700s, building it to 750+ could significantly improve the rates you’re eligible for. 

The best car insurance companies for drivers with poor credit

We analyzed data from the Consumer Federation of America to find the insurers with the lowest average increases for drivers with fair or poor credit. The results: 
  • 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. 
    comes in third, with an average increase of 91% from excellent to poor credit. 
Insurance company
% increase from excellent to fair
% increase from fair to poor
% increase from excellent to poor
American Family
State Farm
app screenshot
Jerry partners with both Allstate and Nationwide, two of the insurance providers with the lowest rate increases for drivers with poor credit. 
Download the Jerry app to find lower premiums regardless of your credit information.

How to improve your credit-based insurance score

Because your credit-based insurance score is more heavily based on your history of credit payments, the best way to improve it is to make all debt payments on time. 
  • Avoid late payments: Making on-time payments is the best way to avoid negative marks on your credit report. Setting up auto-pay, paying off small debts, and keeping your credit utilization below 30% can all improve your score. 
  • Check your credit report yourself: Under the Fair Credit Reporting Act, you’re entitled to a copy of your credit report every 12 months—and if you find inaccurate information on your report, you can request to have it fixed. Head to
    to get your free credit report. 
  • Add utility bills to your report: Some bills, like your utility or rent payments, might not show up on your credit report—but getting them added could help your credit if you make your payments on time. 
  • Only open a new credit line if necessary: Adding to your credit mix won’t have as big an impact on your credit-based insurance score—and a hard inquiry on your account from a new credit card or loan could lower your score. 
  • Refinance your auto loan: If you’re having trouble keeping up with car payments, consider
    refinancing your car loan
    with a new lender to improve your credit rating. 

Are you eligible to refinance your car loan? Find out now. 

If you’ve got the Jerry mobile app, you can quickly check for refinance offers on your current auto loan.
app screenshot
You could be eligible for better financing and a lower interest rate if you’ve been making car loan payments for at least six months.
Jerry can tell you if you’re eligible in just a few minutes—and drivers who refinance with Jerry save an average of $1,823 annually.

Some states are trying to phase out the use of credit-based insurance scores

, Hawaii, and
are the only states where insurers can’t use credit information at all in underwriting—but lawmakers in a handful of other states are toying with the idea of following their example. 
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. 
  • Nevada Regulation R087-20
    : Adopted in 2020 in response to the COVID-19 pandemic, this regulation temporarily prevents insurers from raising policyholders’ rates based on changes to their credit report. The bill will be in force until May 20, 2024. 
  • 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 have recently proposed
H.R. 3693
, a bill which would prohibit insurance companies from calculating rates based on credit as well as: 
  • Gender
  • Education level
  • Occupation
  • Employment status
  • Homeownership
  • ZIP code
  • Marital status
The Prohibit Auto Insurance Discrimination (PAID) act is still under review in Congress. 


What is a credit-based insurance score? 

The credit-based insurance score that insurance companies use to set the price of your insurance policy is based on the same basic information as your scores from major credit bureaus: your history of credit payments, current debt level, length of credit history, credit mix, and pursuit of new credit. However, credit-based insurance scores put more weight on your payment history than your regular score.  

What is a good credit score for insurance? 

The best credit scores for car and homeowners insurance are above 750. If your score is 740 or below, you’re likely to see higher insurance quotes, and drivers with credit under 550 may struggle to find affordable insurance. 

Why do insurance companies go by your credit score?

Insurance companies defend the use of credit reports in insurance underwriting because previous research has demonstrated a correlation between low credit scores and insurance losses. Drivers with poor credit are more likely to file claims and cost insurance companies money, making credit a reliable risk factor.   

Can you be turned down for insurance because of your credit score? 

Yes. In states where it’s legal to use credit scores in setting rates, it’s typically legal for insurers to turn down an applicant entirely because of their credit score. 

What states don’t use credit for insurance?

As of 2023, California, Hawaii, and Massachusetts are the only states that prohibit the use of credit scores in setting car insurance rates. 

Easiest way to compare and buy car insurance

No long forms
No spam or unwanted phone calls
Quotes from top insurance companies
Find insurance savings