Yes, your credit score significantly affects your car insurance premiums in most U.S. states. Insurers use a credit-based insurance score—a number derived from your credit report—to predict the likelihood of you filing a claim. Statistically, individuals with higher credit scores are less likely to incur claims, leading to lower rates. This practice is based on industry-wide data analysis, though it's prohibited in a few states like California and Massachusetts.
Your credit-based insurance score is different from your FICO score but uses similar factors, including payment history, amounts owed, and length of credit history. When you apply for insurance, companies pull a "soft" credit inquiry, which doesn't impact your score. A poor credit score can double your premiums compared to someone with excellent credit.
Here's a table showing average premium increases based on credit tiers, using excellent credit as a baseline:
| Credit Score Tier | Approximate Premium Impact vs. Excellent Credit |
|---|
| Poor (300-579) | +100% to +150% |
| Fair (580-669) | +40% to +70% |
| Good (670-739) | +15% to +30% |
| Very Good (740-799) | +5% to +15% |
| Excellent (800-850) | 0% (Baseline) |
To mitigate this, focus on improving your credit by paying bills on time, reducing debt, and checking your credit report for errors. Shopping around for quotes can also help, as insurers weight credit factors differently. Remember, maintaining a good driving record is still crucial, but credit plays a key role in your overall risk assessment.
