Drivers With Poor Credit Scores Pay Up to 216% More for Car Insurance in These 10 States

You probably know that at-fault accidents and traffic tickets increase your car insurance premiums. It's easy to see why: If you're taking risks behind the wheel, you're more likely to get into accidents, which means you're more likely to file claims your insurer will have to pay.

But few people would guess just how big an effect your credit score has on your car insurance premiums. It can more than double your annual premiums in 27 states, and some drivers pay an even steeper price.

The 10 states that penalize drivers with poor credit scores the most

Insurers argue that poor credit, which often indicates risky financial behavior, goes hand in hand with risk-taking behind the wheel. This is why most states permit insurers to charge higher premiums to drivers with low credit scores. For context, a low credit score is usually considered one between 350 and 579, while an excellent score is between 800 and 850.

Every state and insurer has its own rules, which is why you see different increases everywhere. Here's a closer look at the states that charge the 10 highest average penalties for drivers with poor credit:

The difference can be substantial, though drivers in nearly all states see increases with lower credit scores. The few exceptions to this rule are California, Hawaii, and Massachusetts, which have banned insurers from considering credit information when setting auto insurance rates. Washington had a similar ban, but a judge overturned it in 2022.

Interestingly, Michigan has a ban as well, yet it's at the top of our list. It's possible this is because of a correlation between riskier financial behavior and riskier driving behavior, as insurers suggest. However, many variables go into auto insurance rates and each company's formula is proprietary, so it's difficult to say for sure what's going on here.

That's also why it's important to get quotes from at least three to five companies when trying to find the best rate. Start with our list of the best car insurance companies to find great coverage today.

What to do if poor credit is costing you a fortune in car insurance premiums

If you're struggling with high car insurance premiums due to poor credit, here are three key ways to reduce your current and future costs.

Lower your other car insurance risk factors

Demonstrating safe driving behavior behind the wheel as much as possible is key to reducing your car insurance rate. You may also be able to lower premiums with some insurers by storing your vehicle in a garage instead of on the street or installing a car alarm.

Factors like obtaining higher levels of education, getting married, and turning 25 also reduce your riskiness in the eyes of auto insurers. Be sure to notify your insurer when you reach any of these milestones.

Shop smart

Shopping around is an important first step in securing a low rate. Once you get your quote, you'll have another opportunity to reduce your costs by setting your coverage limits and deductible. Opting for a higher deductible can reduce premiums by 40% or more, though it means you'll have higher out-of pocket costs in the event of a claim.

Reducing coverage may also be an option in a pinch, though this could put you at risk of having too little coverage for serious accidents. Consider working with one of the insurers on our best cheap car insurance companies list to help you save instead.

Raise your credit score

Raising your credit score takes time, but it can benefit all aspects of your financial life. In addition to lower insurance premiums, you can also qualify for better credit cards and lower interest rates on loans. Some of the best actions to help you raise your credit score include:

• Paying your bills on time
• Limiting your monthly credit card charges to 30% or less of your credit limit
• Applying for new credit no more than once every six months
• Leaving old credit cards open as long as they don't charge an annual fee
• Paying down existing credit card debt

It will take time, but sticking with these behaviors for a few months or years can bring your credit score up significantly. And when you get into the good to excellent range, you can shop around for new car insurance again to find a lower rate.