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If you’re like most drivers, you assume your record behind the wheel determines what you pay for car insurance. But depending on where you live, another factor — your credit history — can potentially make an even bigger difference.

The math is startling, especially since the link between credit records and car insurance premiums often flies below the radar. According to an April analysis by the online insurance platform The Zebra, the average annual premium for drivers with poor credit is more than double what it is for drivers with good credit, even if their driving records are the same.

At the extremes, someone with really bad credit pays an average of $6,254 a year — well over triple the $1,673 that a driver with an excellent history does. That’s a difference of over $4,500 a year, far more than the $2,088 average increase a driver sees if they cause a hit-and-run accident (!), according to The Zebra.

So what? Responsible financial habits can give you an advantage on more than loan approvals and interest rates. Despite a longstanding controversy over using credit records to set car insurance rates, it’s allowed in all but California, Hawaii, Massachusetts, and Michigan, adding to reasons to have a strong credit record. (Insurers say your credit history helps predict the likelihood of filing a claim, but critics argue that the practice disproportionately affects minority and lower-income drivers.)

It’s worth noting that insurers use credit-based insurance scores, not regular credit scores, though they are based on the same aspects of your credit history (like your repayment history and outstanding debt.)

Of course, insurers factor in other things, too. Besides your driving history, these often include how much you use your car, whether you live where there are higher rates of vandalism, and the type of car you drive.

As you’re looking for ways to trim your monthly budget — or if holiday deals have you in the market for a new car right now — don’t forget your credit score. With car insurance premiums climbing fast — rising 35% between January 2022 to December 2024, according to LexisNexis Risk Solutions — working to improve your score could really pay off.

Related Reading

Which States Prohibit or Restrict the Use of Credit-Based Insurance Scores? (Experian)

Which Car Insurance Companies Don't Use Credit Scores? (The Zebra)

How to Lower Car Insurance & Save Money (SoFi)

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