Of all the factors that go into your auto insurance rate, this is the one that surprised callers the most, going all the way back to when I started in 2014. Most people assumed their rate came down to their driving record and their car β full stop. Then I’d explain that their credit history was quietly doing just as much work, and the reaction was almost always some version of “wait, why does that matter?”
Here’s how it actually works, why it’s legal, and what you can do if it’s working against you.
It’s Not Your Regular Credit Score
Insurers don’t pull the same FICO score a lender uses for a mortgage or credit card. They use a separate calculation called a credit-based insurance score, built from your credit report but weighted differently β it focuses specifically on patterns that insurance data has shown correlate with how likely someone is to file a claim, rather than how likely they are to repay a loan.
The exact formula is proprietary to each insurer and rating agency, but it generally draws on the same underlying credit report data: payment history, amounts owed, length of credit history, new credit inquiries, and credit mix.
Why Insurers Use Credit at All
This is the part that confuses people, and it’s a fair question β what does your credit card payment history have to do with how you drive? The insurance industry’s own actuarial studies (going back decades at this point) have consistently found a statistical correlation between credit-based scores and the likelihood of filing a claim. Insurers aren’t claiming a causal relationship β they’re not saying bad credit makes you a worse driver β just that, in aggregate, it’s a reliable predictor they’ve found useful for pricing risk.
Whether that’s a fair basis for pricing is a genuinely debated question, which is exactly why it isn’t allowed everywhere.
It’s Not Legal Everywhere
A handful of states restrict or fully ban the use of credit in auto insurance pricing, including California, Hawaii, and Massachusetts β the NAIC tracks which states allow it and which don’t. In those states, your rate is based on driving record, vehicle, location, and other factors β credit isn’t part of the equation at all. In the majority of other states, it’s legal and commonly used.
If you’re not sure whether your state allows it, your state’s Department of Insurance website will confirm β and if you’re shopping for quotes, this is worth knowing before you’re surprised by why two similar quotes from different states came out so differently.
How Much Difference Does It Actually Make?
This varies significantly by insurer and by how far apart the credit tiers are, so I won’t give you a false-precision number β but the gap between excellent credit and poor credit can be substantial, often a meaningfully larger swing than many drivers expect, sometimes rivaling what happens to your rate after an at-fault accident. It’s genuinely one of the higher-leverage factors in your rate, which is exactly why it’s worth paying attention to if it’s working against you.
What You Can Actually Do About It
1. Check your credit report for errors first
Before assuming your score reflects reality, pull your credit report (you’re entitled to a free one from each major bureau annually) and check for mistakes β a wrongly reported late payment or an account that isn’t yours can drag your score down for no real reason. Disputing and correcting errors is one of the fastest ways to see a genuine improvement.
2. Pay on time, consistently
Payment history is typically the single heaviest-weighted factor in any credit-based score. Consistent on-time payments, even on small accounts, compound over time.
3. Lower your credit utilization
The percentage of your available credit you’re actually using matters. Paying down revolving balances (credit cards especially) tends to move the needle faster than most other single actions.
4. Don’t open several new accounts at once
A cluster of new credit inquiries in a short window can temporarily lower your score. If you’re actively trying to improve your insurance rate, it’s not the time to also be shopping for new credit cards.
5. Shop around once your credit improves
Insurers don’t automatically re-check your credit and adjust your rate mid-policy in most cases. If your credit has genuinely improved since you last got a quote, that improvement won’t show up in your premium until you either renew or actively shop for a new policy β so it’s worth getting fresh quotes rather than assuming your current insurer will apply the better rate on its own.
If You Can’t Improve Your Credit Quickly
Credit takes time to rebuild β there’s no fast fix for a low score. In the meantime, the other levers that lower your premium still work regardless of credit: raising your deductible, asking about every discount you qualify for, bundling policies, and comparing quotes across multiple carriers, since insurers don’t all weight credit the same way. A carrier that weights credit less heavily might quote you meaningfully better than one that leans on it hard, even with identical credit and driving history.
Frequently Asked Questions
Does checking my own credit score lower it?
No. Checking your own credit report or score is a soft inquiry and has no effect on your score. Only hard inquiries β like applying for a new loan or credit card β can cause a small, temporary dip.
Will getting auto insurance quotes affect my credit score?
No. Insurance quote comparisons use soft inquiries to check your credit-based insurance score. This is not the same as applying for credit and does not affect your regular credit score.
Does my credit-based insurance score show up anywhere I can see it?
Not typically on standard consumer credit report sites, since it’s a separate, insurer-specific calculation. Some insurers will disclose the factors that affected your rate if you ask directly, particularly if you were denied the best available rate tier.
Last updated July 2026. InsureCompare is an independent comparison service. We may earn a commission if you purchase through links on this page. This does not affect our comparisons or recommendations.