Do Credit Scores Affect Auto Insurance Rates?

If you’ve ever wondered why two drivers with similar cars and clean driving records can pay very different auto insurance premiums, here’s a not-so-obvious factor: credit. Yep—your credit history can play a role in what you pay for car insurance here in Texas.

Let’s break it down in plain English so you know what actually matters (and what doesn’t).

How Credit Impacts Auto Insurance Premiums

In most states—including Texas—insurance companies are allowed to use credit-based insurance scores when calculating auto insurance rates. These scores help insurers predict the likelihood that a policyholder will file a claim in the future.

📊 Important clarification:
A credit-based insurance score is not the same as your FICO credit score.

While lenders focus heavily on things like loan balances and credit utilization, insurance companies look at patterns such as:

• Payment history
• Length of credit history
• Outstanding debt
• Frequency of late payments

Insurers weigh these factors differently because they’re assessing risk, not whether to approve a loan.

Why Insurers Use Credit-Based Insurance Scores

From an underwriting standpoint, data shows a correlation between credit behavior and claims frequency. Drivers with stronger credit histories tend to file fewer claims, while those with weaker credit may statistically file more.

That doesn’t mean you’re a bad driver—it simply means insurers use credit as one of many rating factors, alongside:

• Driving record
• Vehicle type
• Annual mileage
• Location (yes, Austin traffic matters 🚗)
• Coverage limits and deductibles

State Restrictions: What About Texas?

Some states—including California, Michigan, and Massachusetts—restrict or prohibit insurers from using credit in auto insurance pricing.

👉 Texas does allow it, which means your credit can impact your premium if you live in the state.

The good news? Improving your credit over time can help lower your auto insurance costs.

Can Improving Credit Lower Your Auto Insurance Rate?

Yes—potentially. While it won’t cause an overnight drop, positive changes like paying bills on time, reducing outstanding debt, and avoiding new credit issues can lead to better insurance pricing over time.

And remember: not every insurance company weighs credit the same way.

Why Comparing Auto Insurance Quotes Matters

Here’s where working with an independent insurance agency (like us 😉) really pays off.

Every carrier uses a different rating formula. One company might be more forgiving of credit, while another focuses more heavily on driving history or vehicle type.

🔍 By comparing quotes from multiple insurers, we can often:

• Find better pricing
• Identify coverage gaps
• Match you with a carrier that fits your specific profile

Let’s Review Your Auto Insurance Options

Whether your credit is excellent, average, or a work in progress, you still have options. At Dowd Insurance Agency, we shop multiple carriers to help Central Texas drivers find the right balance of price, coverage, and peace of mind.

📞 Contact us today to review your current auto insurance policy and compare quotes from trusted Texas insurers.