In most U.S. states, a lower credit-based insurance score can significantly increase insurance premiums because insurers view lower scores as higher risk for filing claims. Drivers with poor credit may pay over 100% more annually for car insurance compared to those with excellent credit.
If you've ever applied for a credit card, leased a car or gotten a mortgage for a home, you know that credit scores count. You may be surprised to find out they can also affect your car insurance premiums much the same way your driving record, marital status and payment history can.
Having a good credit score can lead to cheaper car insurance rates. A credit score is a major rating factor used by car insurance companies in most states across the US to set potential customers' rates. How a customer handles their finances can be an indicator of their likelihood to file claims.
California
Insurance companies in California don't use credit-based scores or your credit history for underwriting or rating auto policies, or setting rates for homeowners insurance. As a result, your credit won't impact your ability to get or renew a policy, or how much you pay in premiums.
Most insurance companies using credit information will include it as a factor in determining your rate. For example, someone with a relatively high credit score may pay a lower premium than someone with a relatively low credit score.
While major insurers including State Farm, GEICO, and Progressive use credit scores to determine rates, regional insurers CURE Auto Insurance (available in NJ, PA, MI) and Dillo Insurance (available in TX), do not. However, if you live in CA, HI, MA, or MI, laws prevent insurers from using credit to determine rates.
Find out how their credit history will affect your policy. Also, according to a state rule, auto and homeowner insurers must check your credit history every three years. They also need to update their records of it.
7 ways to lower your car insurance premium
Most insurers use credit checks to create a credit-based insurance score to help set your rate. Some insurers provide auto insurance with no credit check, which might seem appealing if you have a poor credit history.
Pay your bills on time.
One of the most important things you can do to improve your credit score is pay your bills by the due date. You can set up automatic payments from your bank account to help you pay on time, but be sure you have enough money in your account to avoid over- draft fees.
FICO® Insurance Scores are snapshots of consumers' insurance risk based on an objective, statistical analysis of credit report information identifying the relative likelihood of an insurance loss, based on the actual loss experience of individuals with similar credit management patterns.
While older models of credit scores used to go as high as 900, you can no longer achieve a 900 credit score. The highest score you can receive today is 850.
Yes, you can likely get a $50,000 loan with a 700 credit score, as this falls into the "good" credit range (670-739) that unlocks better rates, but approval also hinges on your income, debt-to-income (DTI) ratio (ideally below 36%), and overall credit history, with lenders looking for stability and repayment ability, so prequalifying with multiple lenders helps compare terms.
Can my credit score affect my life insurance or auto insurance rates/premium? Yes, indirectly. Most insurance companies will not reject applications for insurance based only on a low credit-based insurance score, but they may only offer that applicant a policy with a higher premium or higher monthly rate.
Getting an 800 credit score in just 45 days is challenging, as significant scores usually take time, but you can make rapid progress by focusing on paying down credit card balances to lower utilization (under 30%, ideally under 10%), paying all bills on time, disputing errors on your credit report, and possibly becoming an authorized user on a trusted account, while avoiding new credit applications. The most impactful actions for quick changes involve reducing high balances and fixing mistakes, as payment history and utilization are key factors.