By Naomi Feld · Research Writer
Published · Updated
Answer in brief
In most states, insurers use a credit-based insurance score—built from your credit report but weighted differently from a lending score—as a rating factor. The effect is large: drivers with poor credit commonly pay 50–100% more than drivers with excellent credit for the same coverage. California, Hawaii, Massachusetts and Michigan prohibit or heavily restrict the practice. Insurers say the score predicts claim frequency; critics say it penalises people for financial hardship. Either way, improving the score lowers the premium over time, and insurers weight it very differently, which makes comparing worthwhile.
What an insurance score is
An insurance score uses credit-report data—payment history, outstanding debt, length of history, new credit, mix—but weights them to predict insurance losses rather than loan default. It does not use income, race, gender, address or employment. Insurers obtain it with a soft inquiry that does not affect your credit.
How much it matters
| Credit tier | Relative premium |
|---|---|
| Excellent | 100% (baseline) |
| Good | 110–120% |
| Fair | 130–150% |
| Poor | 160–210% |
In many states, the gap between poor and excellent credit exceeds the gap between a clean record and a single at-fault accident.
Where it is restricted
- California, Hawaii, Massachusetts — credit may not be used to rate auto insurance.
- Michigan — prohibited since the 2020 reforms.
- Several other states limit how credit may be used (for example, barring it as the sole reason for a rate increase or requiring exceptions for life events).
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Improving it
The levers are the same as for credit generally: pay on time, lower utilisation below 30% (ideally 10%), avoid opening several new accounts at once, and keep old accounts open. Improvements typically show up at the next renewal when the insurer re-pulls the score. Ask your insurer to re-rate if your score has improved significantly mid-term; some will.
Questions & answers
Does checking insurance quotes hurt my credit?
No. Insurers use soft inquiries.
Can I get car insurance with bad credit?
Yes, everywhere. In most states it will cost more; in states that restrict credit rating it will not.
Which states don't use credit for car insurance?
California, Hawaii, Massachusetts and Michigan prohibit it; others restrict it.
Terms used in this guide
- Credit-based insurance score
- A score built from credit-report data and weighted to predict insurance losses. Used in most states; banned in California, Hawaii, Massachusetts and Michigan.
- Rating factor
- Any characteristic used to set a premium: record, age, years licensed, territory, vehicle, credit-based score, mileage, coverage.
- Adverse action notice
- A notice insurers must send when credit information results in a higher rate or denial, explaining the main reasons.
Sources and references
Legal figures on this page (minimum limits, filing periods, statutory benefits) are checked against the primary law or the state insurance regulator listed below. Links and figures last verified Nov 2026.
- MCL 500.2111 — permitted and prohibited rating factors — Michigan Legislature, MCL 500.2111(4)Primary lawInsurers may not set auto rates on sex, marital status, home ownership, educational level, occupation, postal zone or credit score (as defined in § 2162).
- Insurance Code § 1861.02 — rating factors and Good Driver Discount — California Legislative Information, Cal. Ins. Code § 1861.02Primary lawRates must be determined by, in decreasing order of importance, driving safety record, annual miles driven and years of driving experience; optional factors may follow. Good Driver Discount policies must be at least 20% below the rate otherwise charged.
- Credit-based insurance scores (insurance topic) — National Association of Insurance CommissionersState insurance regulatorIn most states insurers may not use a credit score as the sole reason to raise rates or decline, cancel or non-renew; many states require adverse-action notices.
- State chart: use of credit reports/scoring in underwriting — National Association of Insurance Commissioners (2025)State insurance regulatorState-by-state statutory summary; e.g. Massachusetts (auto rates may not be based on credit), Michigan (credit score prohibited, MCL 500.2162), Maryland (credit may rate a new auto policy only).
- Background on: Insurance scoring — Insurance Information InstituteIndependent researchWhat credit-based insurance scores are; Arkansas regulator data showing credit lowered premium on ~57% of auto policies and raised it on ~23%.
- Insurance research and advocacy — Consumer Federation of AmericaConsumer guidanceConsumer-side research on auto insurance pricing, non-driving rating factors and affordability.
- Consumer insurance information — National Association of Insurance CommissionersConsumer guidancePlain-language guides from the body of state insurance regulators; links to every state's insurance department and complaint process.
Practical guidance on this page is original editorial work. Cited sources support factual statements and do not endorse this site. Dollar ranges described as typical or illustrative are editorial estimates, not figures from these sources.
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