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  • AZ Insurance Team

Does your credit score effect your car insurance rate?

Updated: Aug 4, 2020

The simple answer is yes, unless you live in Massachusetts, Hawaii, or California where they prohibit insurers from using consumer credit information. For the other 47 states it is legal to use this method to determine your insurance rates and is used more often than not. However, there is a difference between your credit score and the way insurers determine your credit based insurance rates.

Credit Scores - Determined based on information from your credit report and are used by lending institutions to determine how likely it is that you will repay them on time. Also used to determine interest rates and determine loan qualification.

Credit Based Insurance - Don't factor in your occupation, income history, gender, or any other personal information. Car insurance companies use them to determine the likelihood of an insurance claim in the future.

How insurance companies determine your policy?

Credit based insurance is used for establishing eligibility for payment plans and to determine rates. Most U.S. insurance companies use:

  • Credit based insurance scores

  • Driving history

  • Claims history

  • Where you live

  • Age, make and model of your vehicle

  • Miles driven per year

Some factors that influence your credit based insurance score:

Positive Factors

  • Long establishing credit history

  • No late payments or past due accounts

  • Your open accounts are in good standing

Negative Factors

  • Past due payments

  • Accounts in collection

  • High amount of debt

  • Short credit history

  • High number of credit inquires

FICO estimates approximately 95% of auto insurers use credit based insurance scores in states where it is legally allowed

*All policies are a little different and this may not be applicable to your insurance policy, talk to your agent to see what your policy covers.*

*This post was originally published in May, 2017 and has been updated for freshness, accuracy, and comprehensiveness*


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