- In most states, insurers use a credit-based insurance score as one rating factor, and poor credit can raise your premium.
- California, Hawaii, Massachusetts and Michigan don’t allow credit to be used in setting auto rates; Maryland, Oregon and Utah restrict its use.
- Insurance quotes use a soft inquiry, so shopping doesn’t hurt your credit score.
- Comparing insurers matters more with bad credit, because companies weigh credit very differently.
Many drivers are surprised to learn that their credit history can affect what they pay for car insurance, even with a spotless driving record. Here’s how it works, where it’s limited, and what you can do about it.
What is a credit-based insurance score?
A credit-based insurance score is different from the credit score lenders use. It’s built from information in your credit report, such as payment history, outstanding debt, length of credit history, recent applications and credit mix, and used to predict the likelihood of insurance claims. Insurers that use it say it’s a strong predictor of claim costs. Critics argue it penalizes people for financial hardship unrelated to driving.
Insurers check it with a soft inquiry, which does not affect your credit score, so you can compare as many quotes as you like.
States that ban or restrict credit in auto insurance
| State | Rule (summary) |
|---|---|
| California | Credit isn’t used to underwrite or rate auto policies |
| Hawaii | Auto insurers can’t use credit in underwriting standards or rating plans |
| Massachusetts | Credit information can’t be used to set auto rates, underwrite or renew |
| Michigan | Credit can’t be used to set auto rates or to deny, cancel or non-renew; may be considered for installment payment options |
| Maryland | May help set the rate on a new policy, but can’t be used to deny, cancel, non-renew or raise rates at renewal |
| Oregon | Can’t be used to cancel or refuse renewal; limited use when first offering a policy |
| Utah | Limited use at initial underwriting and only to grant discounts, not to raise premiums |
How to lower your premium with bad credit
1. Shop more insurers than usual
Each insurer weights credit differently, and some weigh it more lightly. With poor credit, the spread between the highest and lowest quote can be especially large. Include regional insurers and ask an independent agent to quote several companies.
2. Lean on driving-based discounts
Usage-based (telematics) programs price you partly on how you actually drive, which can offset a credit penalty for safe drivers. Also ask about safe driver, defensive driving course and multi-policy discounts.
3. Pay in full if you can
Monthly installment plans may carry fees. Paying the six- or twelve-month premium upfront can lower your total cost.
4. Adjust deductibles and coverage wisely
A higher deductible lowers your premium, and dropping collision on an old, low-value car can save money. Don’t cut liability below what protects you. See how much coverage you need.
5. Ask about extraordinary life circumstances
Many states have rules allowing consumers to ask insurers for reasonable exceptions when credit was damaged by events such as serious illness, divorce, death of a family member, job loss or identity theft. Ask your insurer or state insurance department.
6. Improve your credit and re-shop
Paying on time, lowering card balances and fixing report errors can improve your insurance score over time. Ask your insurer to re-rate your policy, or shop again at renewal. Check your reports for free at AnnualCreditReport.com.
If you’re denied or charged more because of credit
Under the Fair Credit Reporting Act, if an insurer takes adverse action, such as charging you more, based on your credit report, it must tell you and identify the credit bureau it used. You’re entitled to a free copy of that report and can dispute errors.
For the full quote-comparison process, see how to find the cheapest car insurance.
Frequently asked questions
Can you get car insurance with bad credit?
Yes. Bad credit doesn’t prevent you from buying car insurance, but in most states it can raise your premium. Shopping several insurers and using discounts can help.
Which states don’t allow credit to affect car insurance?
California, Hawaii and Massachusetts don’t allow credit to be used for auto rates, and Michigan bars its use in setting auto rates. Maryland, Oregon and Utah restrict how it can be used.
Does getting a car insurance quote hurt my credit?
No. Insurers use a soft inquiry for credit-based insurance scores, which does not affect your credit score.