More Than Just Loans: 5 Surprising Ways Credit Affects Car Insurance

When you think of your credit score, you probably associate it with loans, credit cards, or mortgage approvals. But did you know that your credit can also impact how much you pay for car insurance? While it may seem unrelated, insurers in most states use credit-based insurance scores as one factor when calculating premiums—and the results can be surprising.
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Understanding how your credit affects car insurance gives you the power to make smarter financial decisions and potentially lower your costs behind the wheel.

Why Do Insurers Use Credit Information?
Insurance companies use statistical models to assess risk. Studies have shown a correlation between lower credit scores and a higher likelihood of filing claims. As a result, many insurers use a specialized version of your credit report—called a credit-based insurance score—to help determine your premium.

It’s important to note that this score is different from your FICO or VantageScore used for lending. It weighs factors like payment history, credit utilization, and account age, but not income or employment.


5 Surprising Ways Your Credit Impacts Your Auto Insurance
1. Your Credit Can Directly Affect Your Premium
In many states, drivers with poor credit may pay significantly more than those with excellent credit—even if they have a clean driving record. For example, someone with poor credit could pay up to twice as much for the same coverage as a driver with excellent credit.

States that restrict or prohibit this practice include California, Hawaii, Massachusetts, and Michigan.

2. Missed Payments Can Cost You More Than Late Fees
Late payments don’t just hurt your credit score—they can raise your car insurance rates. Since payment history is a key factor in your insurance score, even one delinquency can cause your premiums to increase at renewal time.

3. Improving Your Credit May Lower Your Premium Over Time
If your credit improves, many insurers will offer lower rates at your next policy review. However, most companies don’t automatically recalculate your score—so it’s a good idea to ask your insurer to re-evaluate your premium if your credit improves significantly.

4. It Impacts More Than Just Your Rate
Some insurers may use your credit score to determine:

• Whether to approve your policy application
• What payment plans you're eligible for
• Your eligibility for discounts or preferred tiers

So a strong credit profile may offer better payment flexibility and policy perks.


How to Protect Your Credit-Based Insurance Score
To keep your car insurance rates in check, focus on healthy credit habits:

• Pay bills on time – On-time payments are the single biggest factor.
• Keep credit card balances low – Aim for under 30% of your available credit.
• Avoid opening too many new accounts – Multiple inquiries can temporarily hurt your score.
• Review your credit report regularly – Dispute any errors with credit bureaus.
• Maintain long-standing credit accounts – Credit age can positively influence your score.

Final Thoughts
Your credit affects more than just your ability to borrow—it plays a behind-the-scenes role in your auto insurance costs, payment options, and eligibility for better policies. While it may seem unfair, understanding this connection allows you to take control and make informed decisions that can save you money in the long run.

Take action today:

• Check your credit score and review your auto insurance rates.
• Ask your insurer how credit is used in pricing.
• Work on building stronger credit to drive down your premium.

Because when it comes to car insurance, what’s in your wallet could be steering your rate.

At McClain Matthews Insurance, we put our clients first by offering them policies that they can afford. Insurance is a necessity nowadays, and we're here to help you. Learn more about our products and services by calling our agency at (317) 298-7500. You can also request a free quote by CLICKING HERE. 

Disclaimer: The information presented in this blog is intended for informational purposes only and should not be considered as professional advice. It is crucial to consult with a qualified insurance agent or professional for personalized advice tailored to your specific circumstances. They can provide expert guidance and help you make informed decisions regarding your insurance needs.​