{"id":320870,"date":"2025-11-07T15:02:59","date_gmt":"2025-11-07T20:02:59","guid":{"rendered":"https:\/\/www.reviews.com\/?p=132992"},"modified":"2025-11-07T15:03:00","modified_gmt":"2025-11-07T20:03:00","slug":"how-credit-scores-affects-rates","status":"publish","type":"post","link":"https:\/\/www.reviews.com\/insurance\/car\/how-credit-scores-affects-rates\/","title":{"rendered":"How Credit Score Affects Auto Insurance Rates"},"content":{"rendered":"\n\n\n

You know the drill: Auto insurance rates are higher if you\u2019ve been in an accident, got caught speeding, filed one too many claims, or own an expensive car that would cost a lot to replace. These kinds of things could cost your insurer big bucks down the road, so it makes sense they raise premiums to mitigate risk. Since 2020, overall auto premiums have also climbed because claim severity, parts and labor costs, and litigation have all increased \u2014 so any surcharge or discount tied to rating factors now shows up as a larger dollar difference than a few years ago BLS CPI<\/a>. <\/p>\n\n\n\n

However, you may not realize that insurers look at a whole slew of other, more personal factors when setting premiums \u2014 including your credit score. In most states, lower credit generally equals higher premiums; multiple 2025 analyses find drivers with poor credit often pay about 60%\u2013110% more than drivers with excellent\/very good credit, translating to roughly $1,500\u2013$2,500 more per year for full coverage on average NAIC<\/a> The Zebra<\/a> NerdWallet<\/a> Bankrate<\/a>. <\/p>\n\n\n\n\n\n

Sample rates based on drivers age 23\u201335 with a liability-only insurance policy (in states where credit use is permitted). Your own premium will vary. <\/em>Learn how we tested credit-based auto insurance rates in our Methodology below. <\/em><\/a><\/p>\n\n\n\n

Higher Credit Can Lead to Lower Auto Insurance Rates <\/h2>\n\n\n\n

Your \u201ccredit-based insurance score<\/a>\u201d (the metric insurers use when setting rates) is a little different than your credit score. However, the two are loosely correlated because both are based on your credit report<\/a>. That means credit score can still be a good predictor of how credit will impact your rates, even though insurers use different, risk-focused credit attributes NAIC<\/a>.<\/p>\n\n\n\n

Our study showed that premiums can drop significantly when you move up by one credit tier. Savings become more meaningful the higher your credit is \u2014 typical national patterns across recent filings and quote studies show Good vs. Fair is often +15% to +30%, Fair vs. Poor another +35% to +60%, and Poor vs. Excellent roughly +60% to +110% for full coverage on average The Zebra<\/a> NerdWallet<\/a> Bankrate<\/a>. 
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Based on data for drivers age 23\u201338 with a liability-only insurance policy and standardized driver profiles; impacts vary by state and insurer. <\/em>Learn how we tested credit-based auto insurance rates in our Methodology below. <\/em><\/a><\/p>\n\n\n\n

Younger Drivers Have Lower Credit, Higher Insurance Rates <\/h2>\n\n\n\n

It\u2019s widely known that younger drivers pay more for auto insurance than older drivers. The main reason for this disparity is simple: More years of driving experience under your belt equals safer driving habits (in most cases, at least). <\/p>\n\n\n\n

However, factors other than age can contribute to higher premiums for young drivers, too. Credit is one of those factors. Lower credit scores on average can cause already-pricey rates to spike even further. Younger cohorts tend to have lower average credit scores, while the national average FICO Score sits around 717; that gap often translates into higher premiums where credit is used in pricing FICO<\/a> Experian<\/a>. In states that prohibit credit use for auto (e.g., California, Hawaii, Massachusetts), this particular pricing difference does not apply NAIC<\/a>. <\/p>\n\n\n\n\n\n

*Generational credit scores according to <\/em>Experian fourth quarter 2018 data<\/em><\/a>; recent releases show similar rank order by age, with a national average around 717 in 2024 <\/em>FICO<\/em><\/a>. <\/em>
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Working to raise your credit score is just one of the things you can do to lower your auto insurance rates<\/a>. In most states, you also have rights to dispute credit information and to request relief for extraordinary life circumstances under state laws; insurers must provide adverse-action reasons when credit affects your rate NAIC<\/a> CFPB<\/a>. And hey, a higher credit score will help you out next time you apply for something like a credit card<\/a> or mortgage loan<\/a>, too. 
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What\u2019s an Insurance Score? <\/h2>\n\n\n\n

Insurers don\u2019t think about credit in the same way as a credit card company or lender. Instead of looking at your overall credit score, insurance companies dig into your credit report<\/a> and cherry-pick certain facts to create something called a \u201ccredit-based insurance score.\u201d <\/p>\n\n\n\n

The National Association of Insurance Commissioners<\/a> explains credit-based insurance scores like this: \u201cA regular credit score looks at many different factors to determine how likely you are to repay a loan or a line of credit. A credit-based insurance score looks at some, but not all, factors in your credit history to determine how you are likely to manage your risk exposure.\u201d<\/p>\n\n\n\n

According to FICO<\/a>, the primary source for credit rating services, there are five main components that make up your insurance score: <\/p>\n\n\n\n