Does Your Credit Score Affect Car Insurance?

Two drivers with the same car and a clean record can pay very different prices. Often the difference is credit, even though neither driver has ever filed a claim.

Key takeaways

• In most states, insurers price car insurance partly on a credit-based insurance score, not your lending credit score [1][4].
• Drivers with poor credit paid $1,593 more a year for full coverage in NerdWallet’s 2026 data, about 67% more [1].
• Massachusetts bars credit in auto rating and underwriting. California and Hawaii don’t use it either [1][13].
• If credit costs you money, federal law gives you a right to a notice, a free report and a dispute [6][8].

Does credit score affect car insurance?

Yes, in most states. Insurers can pull your credit report to underwrite insurance; it’s a permissible purpose under the Fair Credit Reporting Act (FCRA) [7]. Most then turn it into a credit-based insurance score that helps set your auto insurance rate.

Why? Insurers say credit predicts claims. The Federal Trade Commission’s 2007 report to Congress found that these scores “are effective predictors of the claims that consumers will file” [2][3]. The same report found scores are distributed differently across racial and ethnic groups, which is one reason the practice stays controversial [2].

There are limits. According to the NAIC, in most states insurers can’t use these scores as the sole reason to raise your rate [4]. A few states go further and ban credit in auto pricing (see the state table below).

Credit is one factor among many, alongside your driving record. See how a speeding ticket, an at-fault accident or a DUI changes your price.

Credit-based insurance score vs. credit score

Both come from your credit report. They answer different questions.

NerdWallet, citing the District of Columbia’s insurance regulator, reports that FICO’s insurance score weighs payment history at 40%, outstanding debt at 30%, credit history length at 15%, new credit at 10% and credit mix at 5% [1]. So the habits that help your regular score usually help this one too.

The score can follow you beyond your car. It can also be used to price home insurance and renters insurance [1].

What insurers can and can’t use

The National Council of Insurance Legislators (NCOIL) writes a model law that states can adopt. It’s a template, not federal law, so check your state’s version. Under it, an insurance score can’t be calculated using your [5]:

• Income
• Gender
• Address or ZIP code
• Ethnic group, religion or nationality
• Marital status

The model also says these items can’t count against you [5]:

• Insurance shopping. Inquiries related to insurance coverage, if they’re coded that way on your report.
• Medical collections. Collection accounts with a medical industry code.
• Rate shopping for a loan. Multiple mortgage or auto loan inquiries within 30 days count as one.
• Inquiries you didn’t start, and checks of your own credit.

Having no credit file can’t automatically be held against you, either. Insurers following the model must treat you as neutral, leave credit out or use a method the regulator approved [5].

How much does credit affect car insurance rates?

A lot. NerdWallet averaged rates from public filings, compiled by Quadrant Information Services, for 35-year-old drivers in every state (checked October 2026) [1]:

Treat these as one company’s sample, not a quote. NerdWallet even says poor credit can raise a rate more than a recent DUI in some cases [1].

A worked example

Take NerdWallet’s full coverage gap: $1,593 a year divided by 12 is $132.75 a month. Over three years at the same rates, that’s $1,593 x 3 = $4,779. That’s the potential price of a weak insurance score, before your driving record enters the picture.

State and insurer spread

The gap swings by state. In NerdWallet’s data, poor credit added 38% in North Carolina but 150% in Wyoming [1]. Insurers differ too: poor-credit full coverage averaged $2,786 to $7,791 a year across the large insurers NerdWallet compared [1]. Your choice of full coverage vs. liability only moves the price as well.

Does getting a car insurance quote affect your credit score?

No. When an insurer checks your credit for a quote, it’s a soft inquiry and doesn’t affect your credit score, according to GEICO [12]. The CFPB says soft inquiries “will not affect your credit scores,” and lists reviews of existing accounts by insurance companies among them [10].

That also answers “does changing car insurance affect your credit score?” Switching means more quotes, and quotes are soft pulls [12]. Hard inquiries come from applying for credit, like a loan or a credit card [10].

There’s a second protection. Under the NCOIL model, insurance-related inquiries can’t be used against you in an insurance score [5]. Where your state follows it, comparing quotes shouldn’t count against you.

Does paying car insurance build credit?

Usually not. Car insurance isn’t a loan, so on-time premiums generally aren’t reported to the credit bureaus. But an unpaid balance sent to a collection agency can land on your credit report and hurt your scores.

If you have little credit, ask each insurer how it treats a thin file. The rules above limit penalties for having no credit [5].

Which states ban or limit credit in car insurance?

Rules vary a lot. Here’s what we could confirm, checked October 2026:

Massachusetts’s rule also bars using credit to decide whether to issue or renew a policy [13]. In NerdWallet’s data, California, Hawaii and Massachusetts are the only states where good- and poor-credit drivers pay the same [1].

Michigan is the tricky one. Experian says auto insurers there can’t use your credit score to set rates [16]. Yet NerdWallet’s 2026 averages show poor-credit drivers in Michigan paying $6,170 vs. $2,950 with good credit [1]. If you live there, ask the state’s insurance department or a local agent how your credit is being used.

Home insurance follows different rules. Credit can still affect home insurance in Hawaii, for example, per Experian [16].

Your rights when credit raises your rate

If an insurer raises your price or denies coverage based on your credit report, that’s an “adverse action.” The FCRA definition covers “an increase in any charge for” insurance, “existing or applied for” [6].

After an adverse action, the insurer must give you [8]:

1. A notice of the adverse action.
2. The name, address and phone number of the credit bureau that supplied the report.
3. A statement that the bureau didn’t make the decision.
4. Notice of your right to a free copy of your report within 60 days, and your right to dispute it.

Many states add more. Under the NCOIL model, the insurer must name up to four specific factors behind the decision. Vague reasons like “poor credit history” don’t count [5].

Extraordinary life circumstances

Did a hardship damage your credit? States that follow the NCOIL model make insurers consider “reasonable exceptions” if you ask in writing [5]. The listed events are:

• A catastrophe declared by the federal or state government
• Serious illness or injury to you or an immediate family member
• Death of a spouse, child or parent
• Divorce, or involuntary loss of alimony or child support
• Identity theft
• Involuntary job loss lasting three months or more
• Military deployment overseas

The insurer can ask for documents, proof that the event hit your credit, and a request within 60 days of your application or renewal. Once it has your documents, it must tell you the outcome within 30 days [5]. If identity theft is the cause, identity fraud insurance can help cover the cleanup costs.

Pro tip: Send the request in writing, attach proof, and keep a copy. The model’s protections are triggered by a written request [5].

How to dispute credit errors that raise your premium

A wrong late payment or someone else’s debt can cost you real money. Here’s how to fix it:

1. Get the report. Use the free copy your adverse action notice offers within 60 days [8].
2. Dispute with the credit bureau. Explain the error in writing, include copies of your proof, and keep the originals [11].
3. Wait for the reinvestigation. The bureau generally has 30 days, extendable by 15 if you send new information during that window [9].
4. Dispute with the company that reported it. That’s the bank or card issuer. It generally must respond within 30 days [11].
5. Tell your insurer. Under the NCOIL model, once a dispute shows your report was wrong, the insurer must re-rate you within 30 days. It refunds any overpayment for up to the last 12 months or the policy period, whichever is shorter [5].

For example, if an error added $40 a month for nine months, you’d be owed $40 x 9 = $360. That’s an illustration, not a promise.

Even without an error, you can ask for a fresh look. The NCOIL model lets you request a re-rate on a current report once a year at renewal [5]. In Oregon, a re-rate you request can’t be used to raise your premium [15]. Add it to your policy renewal checklist.

Car insurance with bad credit or no credit history

You can still get covered. You’ll just want to shop harder.

• Compare several insurers. Each sets its own score cutoffs, so the same credit can land in different tiers [1].
• Ask about no-credit-check options. NerdWallet notes some insurers are moving away from credit-based pricing [1]. Ask what replaces it, such as driving data.
• Trim the price elsewhere. Test a higher deductible in our deductible calculator, then run a coverage gap check so you don’t cut something you need.

Get a local agent to compare credit-based pricing

Insurers don’t weigh credit the same way, and you can’t see their formulas. An independent agent can quote several insurers at once and show you which price your credit profile best.

Search the independent agent directory, browse insurance agents near you, or compare types of coverage first. Bring your current declarations page and any adverse action notice you’ve received.

Frequently asked questions

Why does credit score affect car insurance?

Insurers say credit history predicts claims, and the FTC’s 2007 report agreed that credit-based insurance scores predict claims [2]. So in most states, drivers with lower scores pay more. The NAIC says most states don’t let a score be the sole reason for a rate increase [4].

How much does credit score affect car insurance?

It depends on your state and insurer. In NerdWallet’s 2026 data, poor credit meant $3,954 a year for full coverage vs. $2,361 with good credit, about 67% more [1]. California, Hawaii and Massachusetts showed no gap [1].

Is car insurance based on credit score in every state?

No. Massachusetts bars credit in auto rating and underwriting [13], and California and Hawaii don’t use it [1]. Oregon limits its use at renewal [15]. Most other states allow it within state limits [4].

Does changing car insurance affect your credit score?

No. Getting quotes and switching insurers trigger soft inquiries, which don’t affect your credit score [10][12]. Hard inquiries come from applying for credit, such as a loan [10].

Can you get car insurance with no credit history?

Yes. Insurers following the NCOIL model can’t automatically penalize you for having no credit file. They must treat you as neutral, leave credit out or use an approved method [5]. Compare quotes, since insurers handle thin files differently.

The bottom line

In most states, your credit shapes your car insurance price through a credit-based insurance score. It can add well over $1,000 a year. Shopping won’t hurt your credit, and if credit costs you money, you have the right to a notice, a free report, a dispute and, in many states, a hardship exception. More guides are on our insurance blog.

Sources

1. NerdWallet, “What to Know About a Credit-Based Insurance Score” (Andrew Hurst, updated Mar. 16, 2026; rates from public filings via Quadrant Information Services, 35-year-old men and women, all ZIP codes, Liberty Mutual excluded). Publisher is a comparison business. nerdwallet.com
2. Federal Trade Commission, “FTC Releases Report on Effects of Credit-Based Insurance Scores” (press release, July 24, 2007). ftc.gov
3. Federal Trade Commission, “Credit-Based Insurance Scores: Impacts on Consumers of Automobile Insurance: A Report to Congress” (July 2007). ftc.gov
4. NAIC, “Credit-Based Insurance Scores” (last updated Mar. 19, 2026). content.naic.org
5. NCOIL, “Model Act Regarding Use of Credit Information in Personal Insurance” (PDF; originally adopted 2002, extraordinary life circumstances added July 12, 2009, readopted July 19, 2025), Sections 5 to 9. ncoil.org
6. 15 U.S.C. § 1681a(k), definition of adverse action (Cornell LII). law.cornell.edu
7. 15 U.S.C. § 1681b(a)(3)(C), permissible purposes, underwriting of insurance (Cornell LII). law.cornell.edu
8. 15 U.S.C. § 1681m(a), duties of users taking adverse actions (Cornell LII). law.cornell.edu
9. 15 U.S.C. § 1681i(a)(1), reinvestigation of disputed information (Cornell LII). law.cornell.edu
10. Consumer Financial Protection Bureau, “What is a credit inquiry?” (last reviewed Sept. 5, 2025). consumerfinance.gov
11. Consumer Financial Protection Bureau, “How do I dispute an error on my credit report?” (last reviewed Sept. 2, 2026). consumerfinance.gov
12. GEICO, “Does Credit Score Affect Car Insurance?” (Aug. 31, 2026). Publisher is an insurer. geico.com
13. 211 CMR § 79.04(13), Rate Standards, Massachusetts Division of Insurance (Cornell LII). law.cornell.edu
14. Cal. Code Regs. tit. 10, § 2632.5, Rating Factors (Cornell LII). law.cornell.edu
15. Or. Rev. Stat. § 746.661 (2023 edition with 2024 changes, via oregon.public.law). oregon.public.law
16. Experian, “Which States Restrict the Use of Credit Scores in Determining Insurance Rates?” (Louis DeNicola, Mar. 18, 2025). Publisher is a credit bureau. experian.com
17. Michigan Senate Fiscal Agency, “Insurance Credit Scoring,” State Notes, January/February 2003 (PDF). sfa.senate.michigan.gov