Best Auto Insurance Companies That Use Credit Scores (2024)

Your credit score significantly impacts your auto insurance rates. So, drivers with strong credit frequently see lower rates, whereas bad credit results in higher insurance costs.

The good news is that getting auto insurance quotes doesn’t affect your credit. You can compare quotes from multiple companies and find an insurer where your credit score won’t impact your rates. Read on to learn more about the best auto insurance companies that use credit scores, and the relationship between auto insurance and your credit score.

How Auto Insurance Rates Depend on Credit Scores

Studies show drivers with poor credit typically have more traffic violations and a higher likelihood of getting in an accident, costing their insurance company more money. So naturally, drivers with lower credit scores pay higher overall car insurance rates.

Insurance companies consider various factors when setting rates, including credit score. For example, driving history, claims history, and other criteria may impact your final policy rates. Credit scores range from 300 to 850 and often have numerous layers.

Insurers examine five criteria — all connected to your borrowing history and present circumstances — to set your credit score, also known as a FICO score:

• Payment background: 35%
• Payment due: 30%
• Credit history duration: 15%
• Credit diversity: 10% 
• New credit: 10%

Most car insurance companies check your credit score when setting your rates. So, if you have bad credit, your rates could be expensive, or you could save a lot if you have outstanding credit.

On average, auto insurance rates for drivers with poor credit increased by 59% compared to drivers with average credit. On the other hand, drivers with excellent credit can save more than 20% annually. In extreme circumstances, your credit score might double your spending or reduce your cost by almost a fifth.

We discovered that auto insurance costs might vary by more than $160 per month or $2,000 annually based on the insurer and credit score. Poor and extremely good credit indicate more than a $550 difference in premiums for each company considered.

Average Insurance Costs by State and Credit Score

The consequences of credit ratings vary significantly between insurance companies and states. Not all states allow companies to base insurance rates on your credit score, but most do.

Full Coverage Auto Insurance Average Rates by State

California, Hawaii, Massachusetts, and Michigan are the only states to outlaw utilizing credit scores to set auto insurance prices.

Using credit as a rating factor is also restricted in Maryland, Oregon, and Utah. In these states, regulations restrict when insurers can use credit in rating and underwriting decisions.

Full Coverage Auto Insurance Monthly Rates by Credit Score

Since physical location also matters, your state of residence and ZIP code will impact your rates.

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Impact of Auto Insurance Quotes on Credit Scores

Requesting auto insurance quotes shouldn’t impact your credit score. The “soft pull” credit-check procedure used to obtain your quotes is referred to as such because it doesn’t use as much personal data. In contrast, a “hard pull” credit check affects your overall score:

• Soft pull: Confirms a few pieces of fundamental data that don’t affect your credit score.
• Hard pull: Reveals your entire credit history but temporarily decreases your credit score. A buildup of hard pulls can reduce your score if you apply to numerous lenders quickly.

In virtually every scenario, you won’t get final pricing before the insurance company reviews your credit rating. Learn more about why getting auto insurance quotes doesn’t affect your credit.

Understanding Whether Insurers Run a Credit Check

Insurers will almost always run a credit check when you apply for auto insurance. Studies show a driver’s credit rating offers a valuable prediction of how many claims you’d submit, allowing insurers to pair high-risk drivers with higher rates.

When insurance companies request your Social Security number to offer a quote, your credit gets checked. Some companies offer rates without requesting your SSN but will do so before providing a final cost.

Insurance companies can’t utilize credit scores to set auto insurance premiums in several areas, including California, Hawaii, Massachusetts, and Michigan. Here you can find auto insurance companies that don’t check credit.

Auto Insurance Company Rate Increases Due to Poor Credit

We found various auto insurance quotes for drivers with bad credit after examining rates from leading companies. Geico had the lowest average annual rates ($1,750), while Auto-Owners had the highest prices ($3,970).

A higher credit score = LOWER INSURANCE RATES😲. With inflation high⬆️, finding ways to cut costs💸has become more important than ever. 👉Price compare rates here: https://t.co/TSq0vDEjME
Learn other ways to lower your auto insurance rates🚗: https://t.co/pHF47vG6hP pic.twitter.com/ddqUMtUpCo

— AutoInsurance.org (@AutoInsurance) February 18, 2023

Nationwide had the lowest percentage increase for drivers with poor credit among the companies we looked at (35%). Still, Geico beat Nationwide by $155 in terms of offering the lowest overall car insurance rates to drivers with bad credit. Read more about the best auto insurance companies for drivers with bad credit.

This wide discrepancy in insurance costs highlights the significance of comparison shopping for auto insurance. So, it’s critical to consider the whole premium when comparing prices rather than simply the possible savings from reductions or the amount that rates increase for particular problems.

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Other Factors Insurers Consider When Setting Rates

Insurers consider numerous factors to establish eligibility and rates, regardless of whether credit-based insurance scores get considered. Some factors that affect auto insurance rates include:

• Age
• Gender
• Marital status
• Education
• ZIP code

Your desired insurance types, coverage level, and deductible amount also impact how much you pay for auto insurance.

Individual insurance companies may also look at other factors. For example, a few insurers provide pay-per-mile plans that link costs to usage.

Companies like Root auto insurance or State Farm auto insurance use an app or telematics device to monitor driving behavior, such as speeding or hard braking. If you have good driving habits, this information could lower rates for drivers with poor credit.

Understanding if Car Insurance Payments Help Build Credit

Generally, paying your auto insurance doesn’t improve your credit history. There’s no direct correlation between auto insurance and your credit, though paying your bill late or never may result in debt collection reports. Learn more about how not paying your auto insurance affects credit.

However, using a credit card to make timely car insurance payments can improve your score, but only if you pay off your credit card billing statement every month. Future lenders can view the debt collection reports on your credit report, often for up to 10 years.

Failure to pay your auto insurance may result in your payments going to a collection agency, negatively impacting your ability to obtain loans, credit cards, or mortgages. So if you’re looking for a new car, remember that it could also affect your future auto loan.

Reducing Auto Insurance Rates Despite Bad Credit

Use these tips to get cheaper auto insurance rates with poor credit:

• Ask for reductions. Find out if you qualify for any auto insurance discounts you aren’t already receiving. It may be as simple as going paperless, making a complete payment, or bundling your auto and home insurance.
• Prove you’re a safe driver. Consider a usage-based auto insurance program if you want your driving record to have a greater impact on your insurance rates. The insurance company will monitor your driving habits and can provide up to 40% off your rates for safe driving.
• Examine your insurance contract. Check your auto insurance policy again because your needs may have changed since you first purchased it. For example, you can remove collision and comprehensive coverage from an older vehicle to save money.
• Compare auto insurance quotes online. Each insurer analyzes rating elements, such as credit, differently. If you don’t compare prices from at least three different companies, you won’t find the best deal on auto insurance. To guarantee you get the best deal, check around at least once a year.

Poor credit doesn’t define you. It’s just one factor auto insurance companies consider, and there are several other ways to lower your rates.

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How to Improve Your Credit Rating

Missed loan payments, past-due invoices, and more can negatively affect your credit score. However, your credit isn’t permanent. There are several strategies to raise your credit rating:

• Run a credit report check. Each year, you are entitled to one free credit report. You can identify possible problems or downturns before they become a problem by checking your credit score.
• Pay bills on time. Your credit report will only get worse if you make late payments. Establishing a long-term trend of on-time payments could help your finances.
• Improve your credit usage ratio. Your credit score may suffer if you have several credit cards with high balances. The insurance company might be concerned you have too much debt and can’t pay your premiums. Paying outstanding debt to lower your debt-to-income ratio below 30% may be advantageous.
• Stop opening new accounts. Lenders frequently make queries when you apply for a new loan or credit card, which might lower your credit score. Instead, stick to your existing accounts and reduce those balances to lower your debt-to-income ratio.

Most American drivers’ credit scores influence their auto insurance rates. Therefore, improving your credit score could positively impact efforts to reduce auto insurance costs.

Auto Insurance and Credit Score: Understanding the Relationship Between Them

Having bad credit could quadruple your auto insurance costs. Drivers with poor credit pay 59% more on average for coverage, while those with good credit qualify for premium reductions of up to 24%.

Almost all insurers run a credit check, but California, Hawaii, Michigan, and Massachusetts companies can’t use credit scores when determining rates.

The good news is that getting auto insurance quotes online won’t impact your credit score. You can compare multiple quotes to find an insurance company that doesn’t use credit checks or offers affordable usage-based options you can take advantage of while you work to improve your rating.

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