Car insurance for drivers with good credit

Best car insurance companies for drivers with good credit

We chose our picks for the best car insurance for people with good credit based on average rates, available coverage, discount opportunities and third-party ratings for financial strength from AM Best and customer satisfaction from J.D. Power. If you have a good credit profile, these five companies might be worth considering:

How credit affects your car insurance

Your credit history can influence your car insurance rates in many states. When applying for a policy, car insurance companies often review your credit report to assess your financial responsibility. Generally, a more favorable credit history is linked to lower car insurance premiums, while drivers with less favorable credit may face higher rates. That said, you do not need good credit to qualify for car insurance, although a good credit history can get you lower car insurance rates.

Insurance companies typically perceive drivers with less favorable credit as higher risk. This perception stems from a correlation between credit history and the likelihood of filing claims, making late payments or defaulting on premiums. To balance this risk, insurers may charge higher rates to these drivers. It's worth noting that significant changes in your credit history during your policy period might influence your rate at renewal.

The table below illustrates the difference in average monthly minimum and full coverage premiums for different credit tiers.

What qualifies as good credit?

When considering what constitutes a good credit history for obtaining competitive car insurance rates, insurers often look for a history that aligns with the “good” range of credit ratings — between 670 and 739, according to the FICO scoring model. This is generally considered to be the baseline for competitive pricing.

However, it’s important to clarify that insurers don't use your credit rating directly. Instead, they use a credit-based insurance score, which incorporates your credit history among other factors, to determine your rates.

Providers that don’t factor credit into your insurance rate

While most insurance providers consider your credit in determining car insurance rates, there are some carriers that may not factor in your credit history when you apply for a policy. This can be particularly beneficial for those seeking car insurance who are concerned about the impact of their credit on their premium. Here's a look at some insurance carriers that might not review your credit history as part of their policy application process:

• CURE Insurance
• Dillo Insurance
• Equity Insurance

Note that these insurance providers may not be available in all states.

Although Root Insurance announced and promoted a plan to eliminate credit scores from its pricing model, the company has not made it clear if it has done so. Instead, Root highlights its use of mobile telematics data in setting insurance rates. This strategy aims to create fairer insurance pricing, particularly for those who have been negatively impacted by traditional credit-based pricing.

Further, in some states, it is against the law for insurance companies to use your credit to calculate your rate. Currently, only California, Hawaii and Massachusetts prohibit insurance companies from using credit information to set the price of auto insurance. But keep in mind that if you fail to make on-time payments, insurance companies in these states could still cancel your coverage.

What else impacts my insurance rate?

Your credit rating is only one factor that affects your car insurance premiums. Even if you have great credit, you might still pay an expensive rate based on other criteria. Here are some additional factors that could cause someone with good credit to have a high insurance rate:

• Age: Your age is one of the biggest factors to impact your insurance premium. Younger drivers tend to pay some of the highest rates because they lack experience. As you get older, your insurance rate will typically decrease, assuming you maintain good credit and a clean driving history. (Hawaii and Massachusetts ban the use of age as a rating factor, though.)
• Driving record: Drivers with a good credit rating but a lengthy history of insurance claims, at-fault accidents, tickets or DUI convictions are likely going to pay a higher rate. Maintaining a clean driving record can help you avoid expensive policy surcharges.
• Where you live: California, Hawaii and Massachusetts ban the use of credit as a rating factor. This means that in those states, your credit will not affect your car insurance premium. Additionally, each state has its own set of insurance laws and regulations, which can impact average premiums. For example, Michigan, Oregon, Maryland and Utah have legal restrictions in place for using credit.
• Coverage selections: The coverage selections and limits you choose are one of the biggest factors in your car insurance premium. Choosing higher limits and adding on optional coverage types like roadside assistance or rental reimbursement will generally result in higher premiums but will provide you with more financial protection.
• Your deductible: The deductible is the amount of damage you agree to cover out of pocket in the event of claimable damage. Your insurance kicks in to cover the rest up to your policy limits. Generally, the higher your deductible, the lower your monthly premium. However, you should be able to comfortably pay the deductible out of pocket in an emergency.

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