How your credit score affects home and car insurance rates

Why you can trust Insure.com

Quality Verified

At Insure.com, we are committed to providing the timely, accurate and expert information consumers need to make smart insurance decisions. All our content is written and reviewed by industry professionals and insurance experts. Our team carefully vets our rate data to ensure we only provide reliable and up-to-date insurance pricing. We follow the highest editorial standards. Our content is based solely on objective research and data gathering. We maintain strict editorial independence to ensure unbiased coverage of the insurance industry.

Your credit score is one of the biggest factors insurers use to set your rates, and the gap between good and poor credit can run into thousands of dollars a year. Insurers take your credit history and turn it into something called a credit-based insurance score, a number that predicts how likely you are to file a claim. Lower scores tend to come with more claims, so insurers charge more for them.

That plays out on both your car and home policies. Drivers with fair credit pay around $702 more per year than those with good credit, and homeowners with poor credit pay roughly $3,314 more per year than those with excellent credit. A handful of states have banned the practice outright, but in most of the country your credit still shapes what you pay, which means understanding how it works, and what you can do about it, can save you real money over time.

What is a credit-based insurance score?

A credit-based insurance score is a number insurers calculate from your credit history to predict how likely you are to file a claim. It is not the same as the FICO or VantageScore a lender pulls when you apply for a loan, even though both are built from the same underlying credit data.

Where a lender’s score predicts the odds you’ll repay a debt, a credit-based insurance score predicts the odds and cost of a future insurance claim. The Fair Isaac Corporation (FICO) introduced insurance scores in the early 1990s, and the model has since become near-universal among insurers in states that permit it. FICO estimates that 95% of companies offering personal insurance use credit-based insurance scores to evaluate risk when allowed by state law.

How do credit scores affect your insurance costs?

Credit affects your insurance cost because insurers treat your credit-based insurance score as a predictor of risk, then price your premium accordingly. The lower your score, the higher the predicted likelihood of a claim — and the more you pay for the exact same coverage.

What makes credit unusual among rating factors is its sheer weight. Unlike your ZIP code or vehicle, your credit can swing your premium more than a major driving incident. In some states, a poor credit score raises a driver’s rate more than a recent at-fault accident or even a DUI would. That’s why two people with identical cars, homes, addresses, and driving records can be quoted thousands of dollars apart based on credit alone.

A few things determine how much credit moves your specific rate:

• Your state. Some states ban or limit credit-based scoring; others allow it with no cap on its weight.
• Your insurer. Each company uses its own proprietary model, so the same credit profile gets weighted differently from one carrier to the next.
• Which tier you fall into. The jump from fair to poor credit is far larger than the jump from excellent to good — the penalty accelerates as your score drops.
• Whether it’s a new policy or a renewal. Many insurers only re-pull your score periodically, so improvements may not show up until your next cycle.

How much does credit affect your car insurance rate?

Credit has a major effect on car insurance premiums. Drivers with fair credit pay around $702 more per year than drivers with good credit — and the jump to poor credit is far steeper. In some states, poor credit more than doubles or triples what you’d pay at the state average rate.

The penalty for poor credit varies widely by state. Here’s what drivers with poor credit pay above the state average, based on a 40-year-old driver with a clean record and a Honda Accord LX and a $500 deductible:

What to read next

The best car insurance for people with bad credit in 2026

Show more

Our agents make it hassle-free to get the right quote.

Call (844) 814-8854

Ethan Available Now

Jack Available Now

Robbie Available Now

Ellie Available Now

How much does credit affect your home insurance rate?

Credit affects home insurance premiums just as significantly as car insurance. Homeowners with poor credit pay an average of 151% more for home insurance than someone with excellent credit — roughly $3,314 more per year. Homeowners with fair credit pay 49% more than those with excellent credit, an average of $1,072 more annually.

In other words, moving from poor to excellent credit can more than halve your home insurance bill in many markets. Here’s the national picture by credit tier, based on $300,000 in dwelling coverage, a $1,000 deductible, and $300,000 liability:

State-level gaps between excellent and poor credit are even more extreme in some markets:

A selection of states showing the largest excellent-to-poor credit gaps. Based on $300,000 dwelling coverage with a $1,000 deductible.

Which states don’t allow insurers to take credit scores into account?

Most states let insurers use credit-based scoring with limits — only four ban it outright for auto insurance. Per the National Association of Insurance Commissioners (NAIC), most states bar credit as the sole reason to raise rates or deny, cancel, or refuse to renew a policy, and many require insurers to tell you when credit factored into an adverse decision. 

Here’s how it breaks down:

How can you lower the credit penalty on your insurance?

You can reduce how much your credit costs you on insurance by improving your credit-based insurance score over time and by shopping strategically while you do. Here’s how:

• Pay every bill on time. Payment history is one of the largest inputs into your score, and even one missed payment can hurt.
• Pay down revolving balances. Lowering your credit utilization — how much of your available credit you’re using — is one of the faster ways to lift your score.
• Dispute errors on your credit report. Incorrect negative marks can silently push you into a worse pricing tier; correcting them can move you up one.
• Keep older accounts open. Length of credit history factors into your score, so closing your oldest card can backfire.
• Avoid opening unnecessary new accounts right before shopping for insurance, since new credit can temporarily ding your score.
• Compare quotes from multiple insurers, since each weights credit differently — the carrier that penalizes your score the most isn’t the same for everyone.
• Look into carriers that minimize or skip credit checks, and ask about usage-based programs that price on actual driving behavior instead.
• Re-shop at renewal to capture improvements, since many insurers only re-check your score periodically.

Why do insurers use credit at all — and is it fair?

Whether credit-based insurance pricing is fair is genuinely contested, and reasonable people land on both sides. Here’s the case each makes:

• The case for it: Insurers and many regulators argue the practice is actuarially sound — the statistical link between credit and claims is real and consistent, so pricing for it lets insurers charge lower-risk customers less. Banning it, they argue, would force careful, low-claim customers to subsidize higher-risk ones.
• The case against it: Consumer advocates argue the practice punishes people for circumstances often beyond their control — a medical emergency, a job loss, or a divorce can tank a credit score without making someone a worse driver or homeowner. Because credit problems fall disproportionately on lower-income and minority households, opponents argue that credit-based scoring can deepen existing inequities and price insurance out of reach for the people who can least afford a rate hike.

This unresolved tension is exactly why the rules vary so sharply from state to state — and why lawmakers in several states are actively pushing to ban the practice in 2026.

In the states that allow it, a single dip in your credit score can cost you more at renewal than a speeding ticket would — without you ever knowing the score was the reason.

Alisha Ambre

 

 . .

Alisha Ambre holds a Bachelor of Arts with honours in English Literature and Media Studies. She focuses on crafting clear, engaging content that makes complex information feel practical and approachable for everyday readers. When she’s not writing, she’s likely on the volleyball court or immersed in a good video game.