Your credit score has a major impact on car insurance rates in 2025—except in states where its use is banned (California, Hawaii, Massachusetts, Michigan, and Maryland)12379. Insurers use a “credit-based insurance score,” which is derived from your credit history and designed to predict the likelihood of you filing a claim. A higher score signals lower risk, so drivers with good or excellent credit typically pay much less for the same coverage than those with poor credit123479.

How Much Does Credit Affect Car Insurance Rates?

• Drivers with poor credit pay 88%–104% more for car insurance than those with good or excellent credit, on average459.

• For example, the annual average rate for drivers with poor credit is $4,088, compared to $2,112 for those with good credit—a 95% increase for the same policy29.

• Some insurers show even wider gaps: State Farm charges drivers with poor credit up to 303% more than those with good credit2.

Why Do Insurers Use Credit Scores?

Insurers believe that credit history correlates with risk: statistically, drivers with lower credit scores are more likely to file claims and cost insurers more in payouts147. Credit-based insurance scores consider factors like:

• Payment history (on-time payments help)

• Outstanding debt

• Length of credit history

• Credit mix (types of accounts)

• New credit inquiries46

What You Can Do to Lower Rates

Improving your credit score is one of the most effective ways to lower your car insurance premiums15. Here’s how:

• Monitor your credit report regularly to catch and dispute errors1.

• Pay bills on time—late payments can significantly lower your score14.

• Keep credit card balances low, ideally under 30% of your credit limit1.

• Limit new credit applications unless necessary4.

• Ask your insurer if and how they use credit scores, and whether your spouse or other drivers on your policy affect your rate6.

If you live in a state that bans credit-based insurance scoring, your credit history will not affect your rate1237.

In summary:
A good credit score can save you thousands on car insurance, while poor credit can nearly double your premiums. Improving your credit—by paying bills on time, managing debt, and checking your report—can lead to significant savings on your auto insurance in 2025