Your driving record is the factor everyone expects to move a car insurance premium. Your credit history is the one that surprises people — and in most of the country it moves the number more than a speeding ticket does. This guide covers how credit-based insurance scores work, how much they cost, which states have banned them, and what to do about yours. Updated September 16, 2026.
In NerdWallet's September 2026 analysis, a driver with poor credit and a clean record pays $3,929 a year for full coverage; the same driver with good credit pays $2,344. That's a 68% penalty — larger than a speeding ticket (+29%) or an at-fault accident (+49%), and behind only a DUI (+89%).
How Your Credit Score Affects Auto Insurance Rates
Insurers in most states pull your credit report when you ask for a quote and run it through a model that produces a credit-based insurance score. The score is a claims-risk prediction, not a lending decision: decades of insurer data show that drivers with stronger credit histories file fewer and less expensive claims, and regulators in most states have allowed insurers to price on it.
The result is a rate difference that dwarfs most discounts. On the September 2026 national averages:
| Driver profile (clean record) | Full coverage | Minimum coverage |
|---|---|---|
| Good credit | $2,344/yr | $644/yr |
| Poor credit | $3,929/yr | $1,023/yr |
| Penalty | +68% | +59% |
Source: NerdWallet, September 2026 median rates via Quadrant Information Services; 35-year-old driver, 2023 Toyota Camry LE.
For young drivers the dollar gap is even larger: a 20-year-old with good credit averages $4,741 a year for full coverage, and $7,790 with poor credit. Nearly 40% of Americans aged 20 to 24 have no credit history or too little to score, per the Consumer Financial Protection Bureau, and a thin file is treated much like a poor one.
What Is a Credit-Based Insurance Score?
A credit-based insurance score is calculated from the same report a lender would see, but with different weights. Payment history matters most; outstanding balances relative to limits, the length of your credit history, and recent applications for new credit follow. Income, employment, and the things a lender cares about most aren't part of it. The output is a number on a proprietary scale — insurers don't share it, and it isn't the FICO score on your banking app — that slots you into a rating tier.
Two things follow from that. First, the levers are the ordinary credit-health levers; there is no separate "insurance credit" to build. Second, insurers apply the score differently. As NerdWallet puts it, one company might charge a poor-credit driver 10% more and another 40% more for the same policy — which is why the spread between quotes is widest for the drivers who can least afford it.
How Much More Do Drivers With Bad Credit Pay?
About 68% more for full coverage on the national average, per September 2026 data. The state picture is wider, and our state guides put numbers on it:
- In Kentucky, drivers with poor credit pay about 43% more for full coverage than drivers with good credit — $284 a month against $214 for the excellent-credit tier.
- In Illinois, the gap between poor and excellent credit runs about $65 a month.
- In Georgia, the cheapest carrier's liability rate goes from $76 a month for a clean-record driver to $114 for one with poor credit.
- In California and Michigan, the gap is zero, because the law forbids it.
Set against the other marks on a record, credit is the second-most expensive thing that can happen to a premium: a speeding ticket adds about 29% to the national full-coverage average, an at-fault accident 49%, poor credit 68%, and a DUI 89%.
States That Ban Credit Scoring in Auto Insurance
Four states prohibit insurers from using credit history to price auto insurance:
| State | Status |
|---|---|
| California | Banned under Proposition 103; insurers rate primarily on driving record, years licensed, and mileage |
| Hawaii | Banned |
| Massachusetts | Banned |
| Michigan | Banned since the 2019 no-fault reform, along with ZIP-code rating |
Several other states limit how credit can be used — capping its weight, barring it as the sole reason for a rate increase, or requiring exceptions for hardship — without banning it outright. Everywhere else, it's a full-weight rating factor.
A ban isn't a discount. In California, insurers lean harder on driving record and mileage instead, and a single violation costs more because it also forfeits the state's mandatory 20% Good Driver Discount. In Michigan, the ban sits on top of the most expensive coverage requirements in the country. The rules move the weight around; they don't remove it.
How to Improve Your Credit-Based Insurance Score
The insurance score reads the same report as your credit score, so the fixes are the same — and because insurers re-score at renewal, they pay off within a policy term rather than years later.
Pay Every Bill on Time
Payment history is the heaviest input to both scores. One late payment reported to the bureaus does more damage than any other single event short of a collection or bankruptcy, and it stays on the report for seven years.
Automate the minimum payment on every account, even the ones you pay in full manually. The automation exists to make a late payment impossible, not to manage the balance.
Reduce Your Credit Card Balances
Balances relative to limits — utilization — is the second-heaviest input and the fastest to move. Utilization has no memory: pay a card down before the statement closes and the next report shows the lower figure. Under 30% is the conventional target; under 10% is where the best tiers start.
Avoid Opening Unnecessary New Accounts
Each application is a hard inquiry and a new, young account. A single one is minor; several in a few months reads as risk. Time new credit for after your insurance renewal, not before.
Do Not Close Old Accounts
Length of history counts, and closing your oldest card shortens the average age of your accounts while cutting your available credit — which raises utilization on everything else. An old card with no annual fee is worth keeping open with a small recurring charge.
Check Your Credit Report for Errors
Errors are common enough that checking is worth doing before every renewal, and every U.S. consumer can pull all three bureau reports free every week. Dispute anything that isn't yours; a wrongly reported late payment or a collection that belongs to someone else can move you a full tier.
Pull your reports a month before renewal, not after. Disputes take up to 30 days to resolve, and insurers re-score at renewal — a correction that lands after the renewal date waits for the next one.
Build Credit History If You Have a Thin File
A thin file is scored like a weak one. A secured card, a credit-builder loan, or being added as an authorized user on a family member's long-standing account all build history within a few months. Young drivers should start before they buy their first policy, not after.
Does Checking Insurance Quotes Affect Your Credit Score?
No. Insurance quotes use a soft inquiry — the same kind you generate checking your own score — which is visible to you on the report but not to lenders and has no effect on any score.
Compare as many quotes as you want. Shopping for car insurance is one of the few credit checks with zero downside, and for drivers with lower scores it's the one with the largest upside.
Hard inquiries come from applying for credit — a loan, a card, a financing offer — not from insurance shopping. If a quote process asks for permission to pull your credit, it's the soft kind.
Getting Good Rates With Fair or Poor Credit
Comparison shopping matters most for drivers with lower scores, and the reason is arithmetic. If one carrier charges a poor-credit driver 10% more and another 40% more, the difference between the two quotes on a $2,344 baseline is roughly $700 a year — money that has nothing to do with your driving.
Three moves work:
- Quote widely, including regional carriers. Our state guides show which carrier is cheapest for poor-credit drivers in each state, and it's frequently a regional insurer rather than a national brand — Auto-Owners in Georgia, for instance. Compare quotes for your credit tier rather than assuming the big-brand quote is the market. Our comparison-shopping guide covers how to compare quotes on equal footing.
- Stack the discounts that don't depend on credit. Bundling, multi-car, good student, telematics, and pay-in-full all apply regardless of your score; our discounts guide has the list. A telematics program that can't raise your rate is a way to prove risk directly, on driving data, rather than through a credit proxy.
- Shop again as your score moves. A tier change at renewal is worth re-quoting the whole market, not just accepting the incumbent's new number.
Can Improving Credit Lower Your Auto Insurance?
Yes, and faster than most people expect. Insurers reassess your credit-based insurance score at each renewal, so a score that has moved up a tier since your last policy term produces a lower premium at the next one without you doing anything else. If your credit has improved substantially mid-term — a paid-off loan, a resolved collection, a corrected error — ask your insurer for a re-score; many will run one on request rather than waiting for renewal.
The reverse also holds. A tier drop during the term generally doesn't reprice you until renewal in most states, and several states bar insurers from raising rates at renewal solely on the basis of a worsened credit score. Check the rule where you live before assuming either direction.
How Often Do Insurance Companies Check Credit?
At the initial quote, and at each renewal — every six months or twelve, depending on the policy term. Some carriers also re-score when a policy changes materially: a new vehicle, an added driver, a change in coverage. They don't monitor your credit continuously, and they aren't notified when it changes.
That cadence is the reason the timing advice in this guide keeps pointing at the renewal date. What the bureau shows on the day the insurer pulls the report is what you're rated on for the next term.
Does Filing for Bankruptcy Affect Auto Insurance?
In states that allow credit-based scoring, yes. A bankruptcy is among the most damaging entries a credit report can carry, and it stays on the report for seven to ten years depending on the chapter — Chapter 13 for seven, Chapter 7 for ten. Your credit-based insurance score falls with it, and premiums can rise at the next renewal.
A bankruptcy doesn't disqualify you from coverage, and it doesn't change your driving record. It changes which carrier is cheapest for you. Insurers that weight credit lightly, and the four states that ignore it, are where the rate recovers first.
Rebuilding follows the same steps as above, and the scoring models discount old entries as they age: the impact is heaviest in the first two years and fades well before the entry drops off.
The Bottom Line: Credit and Auto Insurance
In most states, credit history is the second-largest thing you control on a car insurance premium — a 68% swing on the national average, larger than a ticket or an accident. The score insurers use reads the same report as your credit score, moves with the same habits, and gets re-read at every renewal, so improvements pay off within a policy term. And because carriers weight it so differently, drivers with lower scores gain the most from comparing quotes: see how carriers price your profile before your next renewal, and again once your score moves.
Related Guides
- What Affects Auto Insurance Rates? — the full set of rating factors, with current figures
- How to Comparison Shop — comparing quotes on equal footing
- Discounts & Savings — the discounts that don't depend on credit
- The 2026 Savings Guide — every state guide and every way to pay less
Credit-tier, driver-profile, and age figures from NerdWallet's September 2026 car insurance cost analysis (median rates via Quadrant Information Services; 35-year-old driver unless noted; "good" and "poor" credit are credit-score approximations); credit-invisible share per the Consumer Financial Protection Bureau as cited there. State bans per NerdWallet (California, Hawaii, Massachusetts) and Insurify's Michigan analysis (Michigan, 2019 reform); state-level credit gaps per the linked state guides, each dated at its footer. Bankruptcy reporting periods per the Fair Credit Reporting Act. Page rewritten September 16, 2026. Individual rates vary by driver profile and insurer.