If you’re shopping for a new car insurance policy, a credit check will be part of your insurance quote in most states.

But insurance rates are not purely calculated based on a credit check. Other variables are at play, including where you live, the type of car you drive, your age and your driving record, which will match the rate you pay as closely as possible with the cost of potential claims.

Charles Blankson, chair of marketing for the University of North Texas G. Brint Ryan College of Business, says it’s generally reasonable to factor in a driver’s credit score when setting premiums. Still, there should be some flexibility in a two-tiered approach.

“It may be best to take calculated risks and make policies available at affordable rates to those with lower credit scores,” he says.

Which states disallow credit score as a rating factor?

California, Hawaii, Maryland, Massachusetts and Michigan prohibit credit from being used to set premium rates.

Do insurance companies run your credit score?

It’s important to note that while insurance companies check your credit history, they don’t use your credit score. They use the information on your credit report to create their own score.

The credit score used by lenders predicts your ability to repay a loan. A credit-based insurance score predicts whether you’ll file claims.

What do insurance companies review when calculating your auto insurance score?

Insurance companies say the most important factors for a good credit-based insurance score are long credit history, minimal late payments or past-due accounts and open credit accounts in good standing. Past-due payments, collections, a high debt level, many credit inquiries and a short credit history will hurt your score. Your income, age, ethnicity, address, gender and marital status are not considered as part of the score.

The use of credit for setting premiums is controversial. Some consumer advocates say it unfairly penalizes people with low incomes or job losses – those who need cheap car insurance the most.

“Traditional consumers with good credit scores are an essential base for a solid insurance business. These consumers are consistent about paying their bills and insurers should reward them with the best rates,” Blankson says. ”On the other hand, those with low or weak credit scores may have fallen into a bad patch and had difficulty paying bills for a period, but that doesn’t automatically mean that they’re going to be reckless on the road. These individuals could be college students, young adults and others who have faced past financial struggles but are responsible and good citizens who aspire to improve their credit over time.”

What are the pros and cons of using credit to set premiums?

Blankson says there are pros and cons of using a driver’s credit history when setting car insurance rates.


  • Identifying and rewarding drivers with good credit habits can yield consistent revenue and business stability for insurers.
  • A consumer’s credit history says a lot about them. They can demonstrate reliability in paying bills and it may be appropriate for those drivers to receive a break on premiums. This provides an uninterrupted flow of revenue for the insurance carrier.
  • Accessing low rates due to strong credit can be a morale booster for consumers who may feel motivated to keep their credit rating high.


  • Insurers may miss out on potential customers by factoring credit ratings into premium prices, and some consumers may have difficulty obtaining affordable coverage.
  • If insurance prices are out of reach due to low credit ratings, some drivers may opt to drive without insurance – that’s not good for insurers or society.
  • In the long term, an insurance company’s growth could be limited if some consumers are priced out of the market; this can have a cascading effect where lower sales lead to lower profits and lower ROI.

How much does insurance go up if you have poor credit?

Bad credit affects car insurance rates, as insurers consider those with poor credit to be more likely to file claims. When comparing full-coverage rates for drivers with good and poor credit, the average increase is 84% higher than a driver with good credit – $1,700 more per year, a 2022 CarInsurance.com rate analysis shows.

“Sometimes, customers with poor credit scores may be required to pay the entire premium for a six-month policy upfront. Customers with low credit scores sometimes won’t qualify for monthly billing, or they may need to pay a large percentage of the policy up front and the remainder monthly,” he says.

Is there an insurance company that does not use your credit score to determine your rates?

Not all car insurance companies will use credit scores in the rating process. In some states, Direct General does not use credit for rating. Most other carriers use it as a rating factor. If you have poor credit and have some violations on your driving record.

“In any case, fair or not, credit scores often impact one’s insurance premiums,” Blankson says. “So, if you want them to go down, it makes sense to try to make your credit score go up.”

– Michelle Megna contributed to this story.

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Executive Editor

Laura is an award-winning editor with experience in content and communications covering auto insurance and personal finance. She has written for several media outlets, including the USA Today Network. She most recently worked in the public sector for the Nevada Department of Transportation.