Study: Poor Credit Will Cost You Double for Car Insurance

Americans with poor credit pay twice as much for their car insurance as those with excellent credit, but more than two-thirds of Americans don’t know their true credit scores. We ran the numbers and share what drivers need to know about credit to keep their insurance costs low.

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Most folks consider credit a crucial factor in determining what they pay for home mortgages and other big life expenses, but far fewer people know how significantly your credit can impact what you pay for car insurance.

At The Zebra, we work to make car insurance simple and transparent so consumers can make smart, informed decisions and get the coverage they need. We decided to research* one of the insurance rating factors complicating this issue: credit.

We teamed up with Credit Sesame and Quadrant Information Services to examine credit and insurance data from millions of Americans and to assess the degree of impact credit can have on insurance rates. The results are pretty fascinating:

Most Americans Think They Have Good Credit But Most Are Wrong

  • 69% of people incorrectly assess their own credit health.
  • Nearly 3/4 of Americans (73%) think their credit scores qualify as Good, but only 41% of Americans actually have Good credit.
  • About the same amount of folks have Poor credit (42%) as have Good credit (41%).
  • Some folks have better credit than they think; while 11% of Americans think they have Excellent credit, 17% actually do.

Nearly 1/3 of Americans Who Have Poor Credit Don’t Know It

  • Although 42% of Americans have Poor credit, only 11% of Americans think they do.
  • People who think they have Good credit and are wrong (32%) likely have Poor credit (because the majority of people who think they have Excellent credit actually do, so the remainder would have Poor credit).
  • States with the largest percentage of residents with Poor credit (for example, Mississippi, where with 52% of residents have Poor credit) are typically the worst at accurately assessing that they have low credit (only 12% of those with Poor credit know they have Poor credit).

Americans with Poor Credit Pay Twice As Much for Their Car Insurance As Those with Excellent Credit

  • On a national average, car insurance premiums for those with Poor credit cost more than twice as much as premiums for those with Excellent credit.
  • Improving credit from Poor to Good will save drivers an average of 32% in auto insurance premiums.
  • Improving credit from Good to Excellent will save drivers an average of 27% in auto insurance premiums.
StateActual Credit Score (% of Total Population)Self-Assessed Credit Score (% of Total Population)Average Yearly Auto Insurance Rates
New Hampshire21%45%35%15%70%10%$369$699$1,224
New Jersey25%40%35%13%74%10%$888$1,908$3,041
New Mexico13%42%45%11%74%12%$415$564$835
New York24%41%35%13%74%9%$1,677$2,125$2,962
North Carolina14%40%46%11%74%11%$299$335$370
North Dakota18%40%42%14%72%11%$327$429$562
Rhode Island20%44%36%10%78%10%$1,066$1,514$2,011
South Carolina12%42%47%10%72%12%$516$676$925
South Dakota19%45%35%14%71%11%$295$377$559
Washington DC28%35%37%9%77%10%$444$636$960
West Virginia10%42%49%10%71%14%$474$618$910
National Average17%41%42%11%73%11%$612$841$1,238


How Credit Can Impact Your Car Insurance Rates

Pricing insurance is all about assessing risk, and insurance companies consider a person’s financial reliability (largely determined by their credit history) as a key factor in determining how risky that person is to insure. As a national average, these insurance companies charge people with Poor credit twice as much for the same coverage as they charge for people with Excellent credit because they perceive them as higher-risk clients.

Folks can directly affect what they pay for car insurance (and a myriad of other major expenses) by improving their credit scores. Nationally, those who raise their credit from Poor to Good can save an average of 32% in auto insurance premiums, and those who raise their credit from Good to Excellent can save an average of 27%. In some states (as seen in the chart above), credit scores have a more or less significant impact:

  • Michigan residents can reap the most benefit from improving credit scores from Poor to Good, with their auto insurance premiums falling by 44%.
  • New Jersey residents can reap the most benefit from improving credit scores from Good to Excellent, with their auto insurance premiums falling by 53%.
  • New Jersey residents can also reap the most benefit from improving credit scores from Poor to Excellent, with their auto insurance premiums falling by 71%.
  • Michigan and New Jersey also show the highest average auto insurance premiums for those with Poor credit.
  • North Carolina residents would see the least benefit from improving credit score from Poor to Good, seeing only a 9% savings in auto insurance premiums.
  • Illinois residents would see the least benefit from improving credit score from Good to Excellent, seeing only a 7% savings in auto insurance premiums.
  • North Carolina residents would also see the least benefit from improving credit score from Poor to Excellent, seeing only a 19% savings in auto insurance premiums.
  • North Carolina also shows the lowest average auto insurance premiums for those with Poor credit.
  • The top five states that have the highest average premiums and would see the greatest reduction in dollars paid on auto insurance premiums if they were to improve their credit scores, include Michigan, New Jersey, New York, Delaware and Connecticut.

An important thing for all drivers to note, however, is that if you do improve your credit, it’s likely that your current insurance company will not immediately take that into account or automatically reduce your rates. You’re often more likely to get a better rate by re-shopping your car insurance (and potentially switching companies) since many insurance companies check new customers’ credit histories. You can compare rates using your updated credit score at The

Improving your credit does not automatically reduce your insurance rates, so shop around for quotes.

Plus: Credit Score Vs. Insurance Score—What’s the Difference?

According to the National Association of Insurance Commissioners (NAIC), “a regular credit score looks at many different factors to determine how likely you are to repay a loan or a line of credit. A credit-based insurance score looks at some, but not all, factors in your credit history to determine how you are likely to manage your risk exposure.”

In short, your credit score is a big factor in your insurance score, but it’s not the only factor.

More from NAIC: “There are several different companies that create credit-based insurance score reports for insurers to use. FICO looks at five general areas it believes will best determine how you manage risk. This is the breakdown of what it considers and how much the information generally weighs in figuring your credit-based insurance score:

  • Payment History (40%) — How well you have made payments on your outstanding debt in the past
  • Outstanding Debt (30%) — How much debt you currently have
  • Credit History Length (15%) — How long you have had a line of credit
  • Pursuit of New Credit (10%) — If you have applied for new lines of credit recently
  • Credit Mix (5%) — The types of credit you have (credit card, mortgage, auto loans, etc.)” adds that insurance scores take into account your driving history, too, as it is part of your insurance history. “This includes information regarding any tickets, accidents, and insurance claims that you may have filed.”

See more on how your credit impacts your car insurance rates and how to keep your credit in good shape on Quoted.



First, we teamed up with the folks at, which provides free credit scores and credit monitoring, and examined actual credit scores from more than 3 million people. We simplified credit score ranges to “Excellent,” “Good,” and “Poor.”

For the purposes of this study, “Excellent” credit is a score between 700+, “Good” is between 600 and 699, and “Poor” is 599 and below. It’s important to keep in mind that lenders and other organizations may have different definitions of what credit score ranges apply for these particular terms. For example, some deem “excellent” credit as 750+ and some include mid-level range terms such as “fair” and “average.” Even on The, we have different designations from Credit Sesame’s. In order to fairly correlate actual credit scores with average car insurance premiums, we’ve examined only the three ranges of credit scores from that fall cleanly into Credit Sesame’s ranges for “Excellent,” “Good,” and “Poor,” and are not providing average premium data for other credit score ranges that may span across Credit Sesame’s ranges.

Next, we worked with our partners at Quadrant Information Services, which collects enormous amounts of data on car insurance rating factors, including self-assessed credit. We examined perceived credit score ranges from nearly 6 million people seeking car insurance quotes.

For the self-assessed credit scores, people could also respond “Unknown,” which accounts for these percentages not adding up to 100%.

Finally, we looked at how these credit score ranges actually impact car insurance premiums with our own car insurance quote comparison:

Our control profile is a 30-year-old single male who drives a 2012 Toyota Camry the average 10,001-15,000 miles per year mostly for commuting. He owns a home, has had insurance coverage for the last 12 months, has no accidents or tickets in the last 5 years, and his car has an anti-theft device. (Let’s say for simplicity’s sake) he’s looking for the state minimum coverage.

We used data from the most populated zip codes in each state. The national average excludes Hawaii, California, and Massachusetts because these states do not allow credit as a rating factor in determining car insurance pricing.

  • Ben “Chip” Waple

    Very informative post. A lot of good points to consider when buying auto insurance.