February 4, 2025

Auto Insurance

What Is the Cost of Car Insurance Based on Credit Score?

Inquisitive about how car insurance costs vary based on credit score? Your credit score has a huge impact on determining your car insurance premium. More than 45 states in the United States use credit-based insurance scores to assess risks. Higher credit scores mean you’ll pay a lot less for car insurance compared to those with poor credit scores. On average, drivers with poor credit pay about $4,644 per year for full coverage. In contrast, people with excellent credit pay around $2,257. If you have average credit, you might pay roughly $2,883 annually. However, these prices vary significantly by state.

Insurers link lower credit scores with a higher chance of filing claims, which leads to higher premiums. Continue reading to learn more about how credit scores impact insurance costs, why insurers use them, how car insurance rates differ by credit score, and how you can improve your credit to get cheaper car insurance rates.

What Is a Credit-Based Car Insurance Rate?

A credit-based car insurance rate is a premium determined using your credit-based insurance score. Insurers in most states consider this score alongside factors like driving history, claims record, and vehicle type. Research shows that drivers with lower credit scores tend to file more claims, which is why insurance companies use credit-based insurance scores to set rates by predicting the likelihood of filing insurance claims (Via Insurance Information Institute).

How Does Credit-Based Insurance Work

Typically, car insurance providers use your credit-based insurance scores to predict risks. They analyze credit history to determine how likely a driver is to file a claim.

Here are the 5 factors they consider:

Payment History (35%): Late payments can signal financial instability.
Outstanding Debt (30%): High debt levels may increase perceived risks.
Credit History Length (15%): A longer history is most likely to get you better scores.
Credit Mix (10%): A variety of credit types (loans, credit cards) may improve scores.
Recent Inquiries (10%): Frequent hard credit checks can lower scores.

Since insurers believe a lower score means a higher chance of claims, drivers with poor credit may pay over 100% more than those with excellent credit.

Credit score ranges from 300 to 850 and they divide this into the following tiers:

Tier	Credit Score
Excellent	800-850
Very Good	740-799
Good	670 to 739
Fair	580 to 669
Poor	300 to 579

Credit Score Vs. Credit-Based Insurance Score: Are They the Same

No, they are different. A credit score specifically the FICO score is widely used by lenders. It predicts how likely you are to repay loans. A credit-based insurance score, on the other hand, predicts how likely you are to file claims.

Factor	Credit Score	Credit-Based Insurance Score
Purpose	Loan approvals, interest rates	Insurance risk assessment
Used By	Banks, lenders	Insurance companies
Key Factors	Payment history, credit mix, debt-to-credit ratio	Payment history, credit mix, outstanding debt
Impact	Affects loan eligibility	Affect insurance premiums

Note that Both scores use similar data, but insurers weigh payment history more heavily than lenders do. That’s why a good credit score often means a good insurance score, but not always.

How Much Does Car Insurance Cost Based on Credit Score?

Credit scores have a noteworthy impact on determining auto insurance premiums. According to The Zebra, moving from very poor credit to fair credit can reduce rates by an average of 20% ($600 annually), and poor to excellent credit can save you $1537 per year (114%). However, the following states prohibit the use of credit-based scores in setting auto insurance rates:

California
Hawaii
Massachusetts
Michigan

Insurers use a credit-based insurance score to predict risk, assuming drivers with lower scores are more likely to file claims. According to Bankrate, drivers with poor credit can pay up to 106% more for full coverage than those with excellent credit. For instance, the average annual cost for full coverage is around $2,100 to $2,638 for good credit, but it can soar over $4,500 for poor credit. ValuePenguin notes that a driver with a good credit history pays 49% less for average car insurance compared to a driver with poor credit. In fact, those with poor credit pay $144 more per month than drivers with good credit. Similarly, The Zebra found that drivers with very poor credit (below 580) pay 114% more than those with exceptional credit (800 and above), even with identical driving records.

A poor credit score can increase auto insurance costs by up to 95% compared to a good credit history, according to LendingTree. In such a case, you might end up paying more than $4,502 for full coverage auto insurance.

The cost difference also varies by state. Bankrate research shows that drivers with poor credit in New York pay some of the highest rates, averaging $7,456 per year for full coverage. Meanwhile, in Florida, drivers with poor credit pay an average of $8,254 annually, which is more than double the costs for those with excellent credit ($3,466).

Michigan's new legislation bans the use of credit scores for setting insurance rates. Before the ban, Michigan drivers with poor credit paid around $8,640 for full coverage, which was 271.4% more than the $2,326 paid by drivers with excellent credit. The good news is that everyone in Michigan, regardless of their credit score, now pays the same average rate of $3,096 per year, according to a study by The Zebra.

Average Car Insurance Rates by Credit Score

The national average rate for full coverage car insurance by credit score per year is as follows:

Credit Score	Average Annual Premium	Difference from Excellent Credit	Percentage Increase
Excellent (800+)	$2,257	N/A	N/A
Good (670-739)	$2,638	+$381	+17%
Average (580-669)	$2,883	$+626	+28%
Poor (Below 580)	$4,644	+2,387	+106%

Source: Bankrate

Poor Credit (Monthly Rate)	Poor Credit (Annual Rate)	Good Credit (Monthly Rate)	Good Credit (Yearly Rate)	Percentage Difference
$229	$2,748	$146	$1752	58%

*Based on our research from ValuePenguin, the table above shows the national average monthly and yearly rates for full-coverage auto insurance.

State-by-State Annual Full Coverage Premiums Based on Credit Scores

Residents of each state face different insurance prices. The cost of auto insurance varies by state due to several factors, including:

Weather conditions
Traffic patterns
State laws
Minimum coverage requirements
Population density

Besides, credit scores affect car insurance rates differently across states. If you have poor credit, you have to pay 50% to 200% more than those with excellent credit unless you live in California, Hawaii, Massachusetts, or Michigan. As we said earlier, these states have banned the use of credit scores for determining auto insurance rates. Here’s a table showing the cost of auto insurance for different credit scores and the percentage increase from poor to excellent credit for all 50 states in the U.S.A.:

State	Poor Credit Score	Average Credit Score	Good Credit Score	Excellent Credit Score	Percentage Increase from Poor to Excellent (%)
Alabama	$3,834	$2,210	$2,038	$1,741	120.1
Alaska	$4,106	$2,575	$2,387	$2,094	96.1
Arizona	$4,936	$3,049	$2,744	$2,282	116.3
Arkansas	$4,776	$2,733	$2,473	$2,146	122.6
California	$2,981	$2,981	$2,973	$2,981	0.0
Colorado	$6,099	$3,427	$3,144	$2,464	147.4
Connecticut	$5,217	$3,457	$2,720	$1,907	173.5
Delaware	$4,731	$3,010	$2,771	$2,309	104.9
Florida	$8,254	$4,709	$4,171	$3,466	138.2
Georgia	$5,544	$3,212	$2,939	$2,510	120.9
Hawaii	$1,689	$1,689	$1,689	$1,689	0.0
Idaho	$2,158	$1,538	$1,454	$1,312	64.5
Illinois	$4,104	$2,508	$2,315	$1,963	109.1
Indiana	$3,379	$1,909	$1,723	$1,399	141.6
Iowa	$3,767	$2,101	$1,857	$1,530	146.2
Kansas	$5,367	$2,784	$2,518	$2,056	161.0
Kentucky	$5,695	$3,042	$2,747	$2,289	148.8
Louisiana	$6,784	$4,426	$3,978	$3,230	110.1
Maine	$3,405	$1,819	$1,627	$1,384	146.0
Maryland	$5,288	$3,087	$2,793	$2,392	121.0
Massachusetts	$2,090	$2,091	$2,092	$2,091	0.0
Michigan	$3,131	$3,131	$3,131	$3,131	0.0
Minnesota	$5,955	$2,863	$2,528	$2,128	179.9
Mississippi	$4,523	$2,383	$2,149	$1,837	146.2
Missouri	$4,816	$2,783	$2,578	$2,077	131.9
Montana	$4,606	$2,582	$2,394	$2,041	125.7
Nebraska	$5,039	$2,606	$2,332	$1,871	169.3
Nevada	$5,603	$3,811	$3,562	$3,052	83.6
New Hampshire	$3,937	$2,056	$1,823	$1,422	176.8
New Jersey	$6,152	$3,163	$2,785	$2,116	190.7
New Mexico	$4,176	$2,378	$2,193	$1,841	126.9
New York	$7,456	$4,375	$3,916	$3,119	139.1
North Carolina	$2,845	$2,182	$2,047	$1,973	44.2
North Dakota	$4,088	$2,056	$1,798	$1,448	182.3
Ohio	$3,215	$1,746	$1,596	$1,282	150.8
Oklahoma	$4,998	$2,994	$2,741	$2,342	113.4
Oregon	$3,639	$2,120	$1,984	$1,682	116.3
Pennsylvania	$4,537	$2,707	$2,467	$1,998	127.2
Rhode Island	$5,271	$3,335	$2,946	$2,542	107.3
South Carolina	$4,148	$2,246	$2,022	$1,629	154.6
South Dakota	$5,775	$2,682	$2,329	$1,846	212.8
Tennessee	$4,393	$2,383	$2,086	$1,715	156.1
Texas	$6,053	$2,962	$2,545	$2,170	179.0
Utah	$3,889	$2,314	$2,131	$1,764	120.5
Vermont	$2,672	$1,577	$1,470	$1,269	110.5
Virginia	$4,301	$2,378	$2,136	$1,691	154.4
Washington	$2,720	$1,992	$1,845	$1,599	70.1
West Virginia	$4,693	$2,443	$2,175	$1,721	172.6
Wisconsin	$3,446	$2,115	$1,918	$1,622	112.4
Wyoming	$2,832	$1,860	$1,747	$1,466	93.1
District of Columbia	$5,794	$3,391	$2,890	$2,396	141.8%

Source: Bankrate

Based on the table, here are the 5 most expensive states for car insurance after considering poor credit scores:

Florida: $8,254
New York: $7,456
Louisiana: $6,784
Texas: $6,053
Colorado: $6,099

Here are the 5 least expensive states for car insurance after considering excellent credit scores:

Vermont: $1,269
Ohio: $1,282
Idaho: $1,312
Main: $1,384
Indiana: $1,399

Why Does a Low Credit Score Increase Car Insurance Costs?

A low credit score can raise your car insurance rates because insurers see it as a sign of higher risks. According to a study by the Federal Trade Commission (FTC), there is a link between a driver’s credit score and the value and frequency of claims. This indicates you’re more likely to file claims even for smaller damages if you have poor credit scores. This increases the costs of insurers. And that’s why to protect potential losses, insurance companies charge higher premiums to those drivers with poor credit scores.

Also, low credit scores suggest financial struggles which insurers believe can lead to more claims. Several factors contribute to this perception:

Missed or late payments
High debt levels
Short credit history
Frequent hard inquiries

How Can You Improve Your Credit Score?

A higher credit score can help you get cheap car insurance quotes. Since insurers use credit-based insurance scores to set premiums, improving your credit history can save you hundreds or even thousands of dollars per year. Although it takes time to improve your credit scores, if you make small changes, it can lead to greater financial benefits.

Here are 7 Key steps to improve your credit score:

Pay Bills on Time
Keep Credit Card Balances Low
Limit Hard Credit Inquiries
Maintain Old Credit Accounts
Check Your Credit Report Regularly
Reduce Overall Debt
Avoid Unfavorable Factors

Step 1: Pay Bills on Time

Paying bills on time is one of the most effective ways to improve your credit score. Payment history accounts for 35% of your FICO scores. So, consistently paying bills can notably impact your credit scores. In contrast, late payments lower your credit score and make insurers see you as financially unreliable. You can set up automatic payments or reminders to make sure your bills are paid on time.

Step 2: Keep Credit Card Balances Low

A high credit utilization ratio can hurt your score. Therefore, you should try to use less than 30% of your available credit limit. For example, if you have a total credit limit of $10,000 and your balances total $2,000, your credit utilization ratio is 20% ($2,000 / $10,000), which is considered good. Paying off existing balances helps improve your credit score faster.

Step 3: Limit Hard Credit Inquiries

Applying for several credit cards or loans quickly can hurt your credit score. Hard inquiries stay on your credit report for up to two years. Having multiple hard inquiries can lower your score by up to 10 points. A single hard inquiry can reduce your credit score by 5 points, according to FICO. So, if possible, space out applications to avoid sudden drops in your score.

Step 4: Maintain Old Credit Accounts

The longer your credit history, the better your credit score. If you have old credit cards, keep them open, even if you rarely use them. Closing accounts shortens your credit history, which can lower your score.

Step 5: Check Your Credit Report Regularly

Errors on your credit report can lower your score without realizing it. Check reports from Equifax, Experian, and TransUnion for mistakes. If you find incorrect information, dispute it immediately to correct your score.

Step 6: Reduce Overall Debt

Don’t take too many loans. High debt levels make you look financially unstable to lenders and insurers. To improve your creditworthiness, focus on paying down credit card balances, personal loans, and auto loans.

Step 7: Avoid All the Unfavorable Factors

Lastly, some habits can damage your credit score and lead to higher insurance rates. To maintain good credit, avoid the following:

Missing payments
Maxing out credit cards
Applying for too many loans
Ignoring credit report errors
Closing old accounts

In brief, a strong credit score benefits you beyond car insurance. It helps with loan approvals, lower interest rates, and better financial stability. If you pay your bills on time, keep your debt low, and check your credit report regularly, you can improve your credit score and enjoy lower insurance premiums.

Car Insurance Rates by Credit Score: The Bottom Line

Car insurance rates vary greatly based on credit scores. Drivers with poor credit pay on average 106% more than those with excellent credit. The national average full coverage premium is $2,883 if you have average credit, but poor credit holders pay around $4,644, while excellent credit drivers pay just $2,257.

Since insurers associate low credit scores with higher claim risks, you need to improve your credit history. By doing so, you can significantly lower your premium. However, some states ban credit-based pricing to ensure fairer rates for all drivers.

If you’re looking for the most affordable insurance agency, talk to a car insurance agent from L.A. Insurance. You can find an agent here. We make sure you get the cheapest car insurance quote regardless of your credit score. Call us at (888) 500-6065 and protect your car with our affordable full-coverage auto insurance.

Read more about car insurance costs in our articles:

Frequently Asked Questions

What Is the Average Cost of Car Insurance Regardless of Credit Scores?

The national average for full-coverage auto insurance is $175 per month, or $2,100 per year. For minimum coverage, the average cost is approximately $69 per month or $828 per year.

Is It Fair for Insurers to Use Credit Scores for Pricing?

Insurers argue that credit-based insurance scores help predict claim risks and by doing so they offer an accurate insurance quote. However, critics say this practice unfairly penalizes responsible drivers with low credit scores. Some states including California, Hawaii, Massachusetts, and Michigan, have reflected on this and banned credit-based pricing to ensure fairer rates. While improving credit scores can lower premiums, many believe insurance prices should focus on driving history.

Can You Get Car Insurance Without a Credit Check?

Yes, some insurers do offer no-credit-check car insurance but options aren’t vast. California, Hawaii, Massachusetts, and Michigan ban credit-based pricing, so credit scores don’t affect rates there. However, a few insurers including L.A. Insurance specialize in high-risk drivers and don’t check credit while setting auto insurance rates.

Why Do Insurers Use Credit Scores to Set Car Insurance Rates?

Insurers use credit-based insurance scores because research indicates that lower credit scores often correlate with more claims. Poor credit holders are considered financially unstable and more likely to file claims, even for minor damages. By using credit scores, insurers predict potential claims and adjust rates accordingly.

Does Checking Car Insurance Quotes Affect Your Credit Score?

No, getting a car insurance quote doesn’t affect your credit score. Insurers perform soft inquiries, which don’t impact your credit rating. However, applying for loans or credit cards triggers hard inquiries, which can lower your score slightly. Checking insurance rates is safe and won’t deplete your credit.

What Other Factors Affect Car Insurance Rates?

Car insurance rates depend on many factors, not just credit scores. Insurers may consider your driving history, claims record, vehicle type, age, and location. Traffic violations, accidents, and high-risk vehicles also lead to higher insurance costs. Besides, annual mileage, coverage limits, and deductibles also impact rates. State laws and insurer-specific policies play a role, too!

Does Credit Score Affect Car Insurance in Texas?

Yes, credit scores significantly impact car insurance rates in Texas. If you have poor credit, you will pay around $6,053 per year for full coverage car insurance. Conversely, excellent credit holders save roughly $4,000 annually and pay about $2,170. With average credit, you can expect to pay $2,962, and for good credit, the cost is $2,545. Poor credit drivers in Texas pay 179% more than excellent credit drivers.

Does Credit Score Affect Car Insurance in Michigan?

Michigan auto no-fault law banned the use of credit scores in setting car insurance rates in 2019. So credit scores do not impact car insurance rates in Michigan. However, insurers still can use insurance score metrics to determine auto insurance rates. The average full coverage premium in Michigan is $3,131 per year for all drivers regardless of financial history.

Does Credit Score Affect Car Insurance in Florida?

Yes, Florida insurers use credit scores to set insurance rates. If you have poor credit, you might end up paying an average of $8,254 per year. However, excellent, good, and average credit holders pay about $3,466, $4,171, and $4,709 respectively. In fact, a poor credit driver in Florida pays 138% more than an excellent credit driver.

References:

Brooks, A. (2025, January 9). Car insurance rates by credit score. Bankrate. https://www.bankrate.com/insurance/car/rates-by-credit-score/
Background on: Insurance scoring | III. (n.d.). https://www.iii.org/article/background-on-insurance-scoring
myFICO. (2024, December 16). What is a FICO® Score? myFICO. https://www.myfico.com/credit-education/what-is-a-fico-score
Timmons, M. (2025, January 8). Average cost of car insurance (2025). ValuePenguin. https://www.valuepenguin.com/average-cost-of-insurance
Bishop, L. (2025, January 8). How does your credit score affect auto insurance rates? ValuePenguin. https://www.valuepenguin.com/how-does-your-credit-score-affect-auto-insurance-rates
Meyer, S., & Swanson, B. (2024, September 13). Study: Poor credit can raise car insurance rates 114%. The Zebra. https://www.thezebra.com/resources/research/credit-insurance-rates/
Bhatt, R. (2024, December 26). Average cost of car insurance (2025). LendingTree. https://www.lendingtree.com/car-insurance/how-much-does-car-insurance-cost/
Credit-Based Insurance Scores: Impacts on consumers of automobile insurance: A report to Congress by the Federal Trade Commission. (2021, August 5). Federal Trade Commission. https://www.ftc.gov/reports/credit-based-insurance-scores-impacts-consumers-automobile-insurance-report-congress-federal-trade
myFICO. (2024, December 16). What’s in my FICO® Scores? myFICO. https://www.myfico.com/credit-education/whats-in-your-credit-score
Johnston, J. (2025, January 6). How multiple credit inquiries affect your credit score. InCharge Debt Solutions. https://www.incharge.org/debt-relief/credit-counseling/credit-score-and-credit-report/will-multiple-credit-inquiries-hurt-my-score/

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