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Consumers know that their credit score can affect their finances. It’s a factor in loan, lease and credit card applications, and it can even decide whether they can buy a cell phone plan or open a bank account. 

But it also affects insurance premiums. In fact, even with spotless driving records, drivers’ credit scores can more than double their car insurance rates.

Some consumers might call that unfair, and they wouldn’t be alone. Four states — California, Massachusetts, Hawaii and Michigan — have banned insurance companies from using credit scores to price or deny insurance policies, and three more have restricted their use in determining rates. And recently, both state-level and federal legislators have started considering further bans on credit as a rating factor (a characteristic about a driver that’s used to price insurance).

Here’s what The Zebra found in an analysis of the effect of credit scores on 73 million car insurance rates:

  • Drivers with a Very Poor FICO credit ranking pay 115%, or $1,546, more than those with Exceptional credit every year.
  • Depending on the laws about insurance in their state, drivers with Very Poor credit scores can see rate increases anywhere between 60% and 166%.
  • Drivers can lower their insurance rate by an average of 17% by improving their credit score by just one tier.
  • Laws about the use of credit scores and histories in insurance rating are changing, and it could mean savings for some drivers.

Drivers with Very Poor credit pay 115% more than those with Exceptional credit

Nationally, drivers with Very Poor credit scores (under 580) pay an average of $2,895 a year for their car insurance, while drivers with Exceptional credit scores (between 800 and 850) pay just $1,349 per year — even if they have the exact same driving record. 

That’s an increase of $1,546 every year, or 115%, for having a bad credit score. By contrast, the average driver sees an insurance rate increase of $1,212 after causing a hit-and-run. In other words, as far as insurance goes, it’s more expensive to have bad credit than it is to have committed even the worst traffic violations.

Credit - rate by credit tier

The impact of credit on car insurance rates varies from state to state

Every state has its own laws about how insurance is priced, including whether or not insurance companies can use your credit score to set your insurance premiums. In the vast majority of states — 43 and Washington, D.C. — insurance companies are free to consider their customers’ credit scores when determining rates and whether to deny, cancel, or refuse to renew a policy. This leads to rate increases of anywhere from 60% in North Carolina to 166% in New Jersey if a customer’s credit score drops from Exceptional to Very Poor.

Four states have banned credit scores as a rating factor: California, Hawaii, Massachusetts and Michigan. Michigan is the most recent of the bunch, with new legislation around credit and other insurance rating factors (such as gender, marital status and level of education) going into effect in July 2020. Under this law, insurance companies can’t consider Michiganders’ credit scores to price, deny, cancel or refuse to renew a policy, but they can consider drivers’ credit histories, such as histories of payments and bankruptcies.

The ban has provided much-needed relief for Michigan drivers: Where a drop from an Exceptional to a Very Poor credit score would have cost them an average of $6,314 per year as of 2019, it now costs them $0.

StateExceptional (800-850)Very Good (740-799)Good (670-739)Fair (580-669)Very Poor (300-579)% difference Exceptional to Very Poor$ difference Exceptional to Very Poor


District of Columbia$1,228$1,484$1,843$2,279$2,948140%$1,720
New Hampshire$906$1,093$1,351$1,580$1,913111%$1,007
New Jersey$1,333$1,699$2,222$2,786$3,546166%$2,213
New Mexico$1,189$1,383$1,610$1,919$2,420104%$1,231
New York$1,510$1,799$2,173$2,720$3,770150%$2,260
North Carolina$905$982$1,126$1,237$1,44960%$544
North Dakota$1,172$1,441$1,687$2,046$2,475111%$1,303
Rhode Island$1,850$2,248$2,713$3,160$3,799105%$1,949
South Carolina$1,248$1,478$1,743$2,107$2,659113%$1,411
South Dakota$1,483$1,786$2,147$2,678$3,337125%$1,854
West Virginia$1,311$1,627$1,943$2,333$2,856118%$1,545


Drivers can lower their insurance rate as much as 22% by improving their credit by just one tier

Improving their credit score is one of the most effective ways for drivers to save on car insurance. Moving up just one credit tier saves an average of 17% (or $387) nationally, and up to 22% depending on the state.

Even better, drivers with the worst credit scores benefit the most from improving it. The move from a Very Poor to Average rating saves 20%, while every other improvement saves 16-17%.

Credit - tier improvement

Laws about the use of credit to determine insurance prices are changing, and it could mean savings for drivers

Changes to laws about the use of credit scores in car insurance pricing, denial and renewal have typically passed very slowly. California, Utah and Maryland changed their laws in the early 2000s, and Maryland and Oregon changed theirs in the early 2010s.

Now, however, the pace is increasing. In addition to Michigan’s new law, Washington state insurance commissioner Mike Kreidler is now advocating for a ban in the Evergreen State. U.S. Senator Cory Booker (of New Jersey) has proposed the PAID Act, which would prohibit credit as a rating factor nationally. 

But would these laws result in savings for drivers? For most, yes, but not for drivers with the very best credit scores.

FICO credit tierRate without MI credit banRate with MI credit ban% change% of Americans in tier
Very Poor$8,640$3,096-64.2%16%


Michigan’s law provides a good illustration. Without it, Michiganders with Very Poor credit scores would have paid an average of $8,640 for their car insurance every year, while those with Exceptional credit scores would have paid an average of $2,326. Assuming all else was equal, both pay an average of $3,096 after the credit ban. That means that while Michigan drivers with bad credit scores now pay 64% less for car insurance, those with perfect scores pay 33% more.

That being said, drivers in the Exceptional tier are the only drivers who will pay more. And according to Experian, 80% of drivers fall into the credit tiers that save.

Tips for drivers

If a driver has a bad credit score, chances are they’re paying a lot more for insurance than some of their neighbors. But the good news is that there are ways to save, regardless of credit:

  • Shop around. Some insurance companies cater to customers with poor credit. If drivers are paying too much for insurance with their current company, another company might be willing to work with them for a lower price.
  • Make small improvements. If a driver has a bad credit score, their finances aren’t a lost cause. Doing whatever they can to improve their score can help save not just on car insurance, but also on credit card payments, access to refinancing options, and more. The more they save, the more they can apply toward debts and improve their score even more.
  • Look for discounts. Some insurance companies offer discounts for taking defensive driving courses, staying accident-free, earning good grades, and more. Drivers should ask their insurers what discounts they might qualify for.
  • Even drivers with good credit can save. The more a person improves their credit score, the more savings they’ll see on their insurance premiums. Even moving from Good to Exceptional credit can save an average of 30%, or $584, every year.


Between September and December 2019, The Zebra conducted a comprehensive auto insurance pricing analysis using its proprietary quote engine, comprising data from insurance rating platforms and public rate filings. The Zebra examined more than 73 million rates to explore pricing trends across 34,000 U.S. ZIP codes and Washington, D.C. 

Analysis used a consistent base profile for the insured driver: a 30-year-old single male driving a 2015 Honda Accord EX with a good driving history and coverage limits of $50,000 bodily injury liability per person/$100,000 bodily injury liability per accident/$50,000 property damage liability per accident, with a $500 deductible for comprehensive and collision. 

Finally, some rate data may vary slightly throughout this report based on rounding.

About The Zebra

The Zebra is not an insurance company. We publish data-backed, expert-reviewed resources to help consumers make more informed insurance decisions.

  • The Zebra’s insurance content is written and reviewed for accuracy by licensed insurance agents.

  • The Zebra’s insurance content is not subject to review or alteration by insurance companies or partners.

  • The Zebra’s editorial team operates independently of the company’s partnerships and commercialization interests, publishing unbiased information for consumer benefit.

  • The auto insurance rates published on The Zebra’s pages are based on a comprehensive analysis of car insurance pricing data, evaluating more than 83 million insurance rates from across the United States.