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Licensed property and casualty insurance agent
10+ years editing experience
NPN: 20461358
Updated
Most states allow insurers to use your credit history when setting your car insurance rates, but not in the way you might think. Insurers don’t use your consumer credit score as lenders do. Instead, they review your credit history with a soft pull, which doesn’t hurt your credit.
Car insurance companies use your credit information to determine a credit-based insurance score, which they use to help determine your premium. But not all states allow insurers to use your credit information.
We’ll break down how your credit affects your rates and which insurers offer the cheapest premiums. We’ll also tell you how to save money on your car insurance, even with poor credit.
California, Hawaii, Massachusetts, and Michigan don’t allow Insurers to consider your credit history when setting car insurance rates.
Drivers with poor credit pay 38% more for car insurance than people with excellent credit.
Insurers look at your credit history and activity, debt, and the types of accounts you have to calculate your credit-based insurance score.
Auto insurance companies use many rating factors to determine your rates. The more likely insurers think you are to file a claim, the more you’ll usually pay for car insurance. Insurers consider your credit history because studies show that drivers with poor credit habits, like missed payments and large balances, file more claims.[1]
Insurers consider some of the same factors as lenders. Here are the parts of your credit history that could raise your car insurance rates, from highest to lowest impact:[2]
Payment history: Insurers consider things like missed or late payments, accounts going to collections, or bankruptcies as big indicators that you’re a high risk to insure.
Outstanding debt: Large balances or maxed-out credit cards show insurers a potential lack of responsibility, which means they’ll usually charge more for coverage.
Length of credit history: Your credit history is based on when you first opened a line of credit. Insurers consider a shorter history to be riskier.
Recent credit activity: New accounts and hard inquiries signal to companies that you might be a higher risk to insure.
Credit mix: The types of accounts you have open, including personal or auto loans, mortgages, and credit cards, indicate to insurers whether or not you can manage different types of credit.
Banks and lenders use your FICO credit score during credit checks for loans and credit cards. These checks are a hard pull that can affect your score. Insurers use a soft pull to calculate your credit-based insurance score, which can affect your auto insurance rates.
Research shows that drivers with poor credit file more claims and have higher payouts than drivers with good credit. That’s why insurers use credit when pricing policies.[3]
Drivers with poor credit typically pay more for car insurance because they’re more likely to file claims. If you make a late payment or open a new credit account and your credit-based insurance score drops, your rates can also go up when your policy renews.
Drivers with poor credit pay 38% more for car insurance, according to Compare.com data. Check out the table below for average rates for drivers with excellent credit compared to drivers with poor credit, according to Compare.com research.
Company  | Average Monthly Premium: Excellent Credit | Average Monthly Premium: Poor Credit |
|---|---|---|
| Allstate | $64 | $90 |
| Farmers | $91 | $132 |
| GEICO | $64 | $100 |
| Nationwide | $84 | $116 |
| State Farm | $43 | $88 |
| USAA | $46 | $63 |
You can find coverage for as little as $51 per month, even with less-than-perfect credit.
Not all insurance companies weigh your credit history the same way. Some offer surprisingly affordable rates even if you don’t have perfect credit. That’s why comparing insurance quotes from multiple insurers is essential. Premiums can vary widely from one company to the next, and shopping around can save you money.
The following table shows the cheapest car insurance companies for drivers with poor credit, according to Compare.com data.
Company | Average Monthly Premium |
|---|---|
| Country Financial | $51 |
| USAA | $63 |
| Auto-Owners | $82 |
| State Farm | $88 |
| Allstate | $90 |
| Mile Auto | $91 |
| American Family | $94 |
| Commonwealth Casualty | $100 |
| GEICO | $100 |
| Safeco | $102 |
| The General | $104 |
| National General | $108 |
| Mercury | $110 |
| Direct Auto | $113 |
| Root | $113 |
| Dairyland | $116 |
| Nationwide | $116 |
| Erie | $118 |
| GAINSCO | $119 |
| Travelers | $119 |
| Bristol West | $128 |
| Elephant | $132 |
| Farmers | $132 |
| Anchor | $139 |
| AssuranceAmerica | $140 |
| Liberty Mutual | $150 |
| Clearcover | $151 |
| Plymouth Rock | $155 |
| 21st Century | $162 |
| Shelter | $163 |
| CSAA | $178 |
| State Auto | $187 |
| The Hartford | $187 |
| Chubb | $230 |
| Amica | $306 |
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Although most states allow insurers to consider your credit history, some limit or ban companies from using your credit as a rating factor for car insurance rates.
Here are the states that ban the use of credit information for auto insurance pricing:
California: Insurers can’t use credit history or scores when setting rates.
Hawaii: Insurers can’t use credit for auto insurance policies, but they can for homeowners insurance.
Massachusetts: Insurers can’t use credit information to set rates or renewal premiums.
Michigan: Companies can’t use your credit history to set car insurance rates or to refuse, cancel, or renew coverage. But they can use it to calculate monthly payments.
The following states restrict how insurers can use your credit info:
Maryland: Insurers can use credit when setting your initial rates, but can’t use it to deny or cancel coverage, or raise premiums at renewal.
Oregon: Insurers can use your credit for new insurance policies, but they can’t cancel or refuse to renew your coverage based on your credit alone.
Utah: Insurers can check credit history for new applicants or for customers applying for discounts. Your insurer can cancel your policy within 60 days, but after that, they can’t use your credit to increase your rates or cancel your policy.
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Even if you have average or poor credit, you can still lower your car insurance costs. Here are a few ways to save on your monthly insurance payments:
Ask about discounts. Most insurers offer discounts for safe driving, bundling your policies, or completing a state-approved defensive driving course.
Maintain a clean driving history. Avoiding tickets and accidents on your driving record can lower your rates.
Limit coverage on older vehicles. Consider dropping comprehensive or collision coverage if you have an older or paid-off car that you can afford to repair or replace yourself.
Raise your deductibles. Increasing your deductible can lower your premium. But make sure you can afford the higher out-of-pocket cost if you file a claim.
Compare quotes. Some insurers don’t put as much weight on your credit history or don’t consider it at all. Shopping around, especially at each policy renewal, can help you get the best deal.
Compare quotes from 100+ top insurers and save money in seconds.
Improving your credit takes time, but it can help lower your car insurance premiums in the long run. You can start to improve your credit by paying your bills on time and paying down your outstanding debt. Check your credit report each year from the three credit bureaus — Equifax, Experian, and TransUnion — and review them carefully and dispute any errors.
You can keep old accounts open to boost your available credit as you pay down debt. Maintaining a healthy mix of credit types and avoiding too many new credit inquiries can also improve your credit.
We answered some common questions people ask about how credit affects car insurance rates. Check them out below.
Car Insurance companies don’t use your regular credit score. Instead, they use specific credit factors to create a credit-based insurance score. You can improve your credit by paying your bills on time, keeping debt low, and avoiding opening too many accounts.
Typically yes. Most states allow insurers to consider your credit history when deciding to sell you a policy. But California, Hawaii, Massachusetts, and Michigan don’t allow companies to use your credit history as a rating factor.
Some insurers offer car insurance with no credit check. But those companies typically specialize in working with high-risk drivers. Some states ban or limit insurers from using your credit history, including California, Hawaii, Massachusetts, and Michigan.
Typically yes. If you don’t have a credit history, your insurer may charge you higher car insurance rates. Your credit history indicates to companies how responsible you are, and without much of a history, most insurers will consider you a higher risk to cover. But some states limit or ban insurance companies from using credit.
No. Insurers use a soft credit pull when giving you a quote, which doesn’t affect your credit. So getting quotes from multiple companies won’t hurt your credit. Applying for a new account or increasing your credit limit are examples of hard inquiries that can affect your credit.
Data scientists at Compare.com analyzed more than 50 million real-time auto insurance quotes from more than 75 partner insurers in order to compile the rates and statistics seen in this article. Compare.com’s auto insurance data includes coverage analysis and details on drivers’ vehicles, driving records, insurance histories, and demographic information.
All the rates listed in this article have been collected from a combination of real Compare.com quotes and external insurance rate data gathered in collaboration with Quadrant Information Services. Compare.com uses these observations to provide readers with insights into how auto insurance companies determine their premiums.
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Licensed property and casualty insurance agent
10+ years editing experience
NPN: 20461358
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