Your Credit Score Is Secretly Raising Your Insurance Rates

The Stat That Should Make You Angry (Then Motivated)

Drivers with poor credit pay roughly 40–109% more for car insurance than drivers with excellent credit — even with a spotless driving record. According to The Zebra's analysis of 61 million auto insurance rates, someone with a credit score under 580 pays an average of $2,729/year for car insurance. Someone with a score above 800? Just $1,308. Same car. Same driving history. Same coverage.

That's up to $1,421/year extra — purely because of your credit score.

And it's not just auto insurance. Homeowners with poor credit pay about 72% more for home insurance than those with good credit, according to NerdWallet's 2026 rate analysis. That can mean an extra $1,800/year on your home insurance premium.

Why Insurers Care About Your Credit

Insurance companies use what's called a "credit-based insurance score" — a modified version of your regular credit score. Their reasoning: decades of data show that people with lower credit scores tend to file more claims. The correlation is consistent enough that nearly all major insurers use it in the 46 states that allow it.

Is this fair? Consumer advocacy groups say no — arguing that poor credit often results from job loss, medical bills, or divorce rather than irresponsibility. Lawmakers in Iowa, New York, Oklahoma, and Pennsylvania are currently pushing bills to ban the practice. But right now, in most states, it's legal and widespread.

The Silver Lining: Improving Your Credit Saves You Money Fast

Here's the upside: improving your credit score by just one tier (for example, from "poor" to "fair") can save you an average of $355–$489/year on car insurance alone. That's real money for a change that also helps you in every other area of your finances.

The five biggest factors in your credit-based insurance score:

1. Payment history — Pay every bill on time. Set up autopay on everything. This is the single biggest factor.
2. Outstanding debt — Pay down credit card balances. Keep utilization below 30% of your limit.
3. Length of credit history — Don't close old accounts. Even if you don't use them, their age helps your score.
4. New credit inquiries — Don't open multiple new accounts in a short period.
5. Credit mix — Having different types of credit (credit card, auto loan, etc.) helps slightly.

States Where Credit Can't Touch Your Insurance

If you live in California, Hawaii, or Massachusetts, insurers cannot use your credit score for auto insurance pricing. For homeowners insurance, California, Maryland, and Massachusetts ban it. Several other states (Oregon, Utah, North Carolina, Nevada) have partial restrictions.

What to Do Right Now