Kudos has partnered with CardRatings and Red Ventures for our coverage of credit card products. Kudos, CardRatings, and Red Ventures may receive a commission from card issuers. Kudos may receive commission from card issuers. Some of the card offers that appear on Kudos are from advertisers and may impact how and where card products appear on the site. Kudos tries to include as many card companies and offers as we are aware of, including offers from issuers that don't pay us, but we may not cover all card companies or all available card offers. You don't have to use our links, but we're grateful when you do!
How to Improve Your Credit Score for Cheaper Car Insurance (2025 Guide)
December 12, 2024
If your credit score is dragging down your car insurance rates, don’t despair – you have the power to change it. Improving your credit score can lead to significantly lower auto insurance premiums, since insurers view better credit as a sign of lower risk.
In this 2025 guide, we’ll explain how credit and insurance are connected and walk you through practical steps to boost your credit score. By improving your credit, you not only open the door to cheaper car insurance, but you’ll also strengthen your overall financial health.
Why Better Credit Means Lower Insurance Rates
It may seem odd that something like a credit score, which is about loans and credit cards, affects your car insurance. But insurers commonly use a credit-based insurance score to help set your rate. Drivers with higher credit scores are statistically less likely to file claims, so insurers reward them with lower premiums. Conversely, poor credit can make your insurance cost shoot up – potentially double the rate of someone with excellent credit.
The difference can be huge. For instance, moving from a “poor” credit tier to a “good” credit tier could drop your annual car insurance cost by hundreds of dollars. The good news is, credit is not a fixed trait – it’s something you can change. Unlike your age or your past accidents, your credit score responds to the financial actions you take.
Improving credit does take patience and discipline, but even small improvements can start to help your insurance rates at renewal time. Keep in mind, insurers usually update your credit info at renewal periods, so there might be a slight lag between your score improving and seeing the insurance benefit. But it will come.
Step 1: Review Your Credit Reports for Errors
Begin your credit-improvement journey by understanding what’s on your credit report. You actually have three credit reports: from Experian, Equifax, and TransUnion, and you can get each for free at least once a year via AnnualCreditReport.com. In 2025, as part of ongoing pandemic relief measures, you may still be able to get free online reports weekly. Pull your reports and comb through them carefully for any errors or fraudulent accounts.
Common errors include accounts that don’t belong to you, incorrect late payments reported, wrong balances, or outdated negative items that should have fallen off. If you spot anything inaccurate, dispute it with the credit bureau reporting it. They are required to investigate and correct verified errors, usually within 30 days.
Fixing an error can give your score an immediate boost if, say, a wrongful late payment is removed. Also, check the specific factors hurting your score. Credit reports might indicate things like “high utilization” or “too many recent inquiries.” This gives you a roadmap of issues to tackle.
Insurance companies won’t tell you your exact insurance score, but if your credit caused you to pay more, you’re entitled to an adverse action notice that lists the top reasons. This notice can clue you in on what to improve.
Step 2: Pay All Your Bills on Time (Payment History)
There’s no avoiding this one – the single biggest factor in your credit score is payment history, making up about 35% of a FICO score. Lenders (and by extension insurers) want to see that you reliably pay what you owe. So, from this day forward, make it a priority to never miss a payment due date. This applies not just to credit cards or loans, but any bill that could end up in collections (medical bills, utilities, etc.).
Set up automatic payments or at least reminders on your phone. Even paying the minimum on a credit card is far better than missing a payment entirely. If you have past late payments, they will hurt less as they age (after a year or two). But any new late payment will set back your progress significantly, so protect your streak. Over time, a solid on-time payment record will shine through and boost your score.
If you struggle with due dates scattered through the month, try calling your credit card issuers to adjust your due dates to a common day. Many companies will let you choose your due date. You could align them with your payday, for instance. Simplifying your bill schedule makes it easier to pay on time.
Step 3: Reduce Your Credit Utilization (Debt Management)
The second biggest factor in your credit score is how much you owe relative to your credit limits – known as credit utilization. This heavily influences about 30% of your FICO score. High utilization (using a large percentage of your available credit) signals potential risk, and it can drag your score down even if you haven’t missed payments.
To improve this: pay down your credit card balances as much as possible. Aim to use less than 30% of your credit limit on each card, and ideally 10% or lower for the best scores. For example, if you have a card with a $5,000 limit and you’re carrying a $4,000 balance, that’s hurting your score. If you can reduce that balance to $1,500 or below, you’ll likely see a positive impact on your credit score fairly quickly.
Strategies to lower utilization:
- Focus on paying down high-balance cards first. Getting one card from 90% usage to 50% will help more than spreading money across all cards evenly.
- Consider a balance transfer to a card with a 0% intro APR if it helps you pay debt faster.
- Ask for a credit limit increase on a card if your account is in good standing – a higher limit with the same balance instantly lowers utilization. Just don’t go use the new credit; the point is to widen the gap between what you owe and your limit.
Lowering your credit card balances not only boosts your credit score, it also saves you money on interest and shows insurers you’re financially responsible. It’s a win-win for your budget and your insurance rates in the long run.
Step 4: Avoid New Credit Applications
While you work on improving credit, it’s wise to hold off on unnecessary new credit inquiries or accounts. Every time you apply for a loan or credit card, a hard inquiry appears on your report and can ding your score slightly. Multiple inquiries in a short time amplify that effect and can make you look riskier. Additionally, opening a new account will reduce your average account age, which is another minor factor in your score.
So, unless you truly need a new credit line, try to avoid applying for new credit until your score rebounds. If you’re shopping for a car loan or mortgage, those inquiries are usually grouped and counted as one if done in a short span – but credit card inquiries each count separately. Space them out or postpone them.
One exception: if you have no credit or very thin credit, you might actually need to open a new account to build a history. That can be beneficial in the long term. But for most people reading this, focusing on existing credit management is the way to go for now. Remember, your goal is to show stability and reliability – lots of new borrowing doesn’t send that signal.
Step 5: Keep Old Accounts Open
The length of your credit history (average age of accounts and oldest account age) influences your score too. A longer, well-managed credit history is better. So, if you have old credit card accounts that you don’t use much, do not close them – especially not while trying to improve your credit. Keeping them open can help maintain a longer average credit age and more available credit.
For example, if your oldest credit card is 10 years old and you close it, your average account age might drop, and you lose the available credit limit. Unless an old card has an annual fee you can’t justify, it’s usually better for your score to keep it open. You can put a recurring charge on it and pay it off each month to keep the issuer from closing it for inactivity.
Step 6: Consider a Secured Credit Card or Credit-Builder Loan (If Needed)
If your credit is severely damaged or you have very few accounts, a secured credit card or credit-builder loan can be a stepping stone to boost your score. These are products designed to help people with low credit build positive history.
With a secured card, you put down a security deposit and get a credit card with a $300 limit. Use it for small purchases and pay it on time – this adds positive records to your credit report. Over 6-12 months of on-time payments, your score should start improving. Many secured cards will even upgrade you to an unsecured card and refund your deposit after a year of good behavior.
A credit-builder loan is offered by some banks and credit unions: essentially, you “borrow” a small amount that is held in an account while you make payments on it. When you’ve paid it off, you get the money, and all your payments were reported to the bureaus, building your credit. It’s forced savings with a credit benefit.
These tools are especially helpful if you had a credit wipeout. They give you a fresh chance to prove reliability. Just make sure any product you choose reports to all three credit bureaus (most mainstream ones do).
Step 7: Give It Time and Monitor Your Progress
Improving credit is a bit like a diet or fitness plan – results take time, but they will come with consistency. As months go by of paying on time and whittling down balances, you’ll likely see your credit score start to rise. Use free credit score monitoring to track your progress. Seeing your score go up can be motivating and also alerts you to any setbacks or errors.
Typically, you might see some improvement after 3-6 months of good habits, and major improvement after 12+ months. Every situation is different: if you had a single issue, your score might rebound faster. If you had multiple derogatory marks, it’s more gradual.
Be patient and avoid the quick-fix traps, for example, never pay a “credit repair” company that promises to magically erase accurate negative info – if the info is accurate, only time and improved habits will lessen its impact. The only quasi-quick fix is error correction, as discussed, which is why we put that first.
Reaping the Rewards: Lower Insurance Rates Await
As your credit score improves, you should start to reap the rewards in various ways. You’ll likely get better offers for credit cards and loans, and of course, the reason you’re reading this – better car insurance rates. Typically, when you go from a poor credit tier to a fair or good tier, you’ll notice insurers offer more reasonable quotes.
Make sure you shop your car insurance again once you know your credit has significantly improved. Insurers won’t always adjust a policy mid-term, but at renewal, you can request a re-rating. Or you can switch to a new insurer that will quote you based on your new credit.
Bear in mind that some states ban or limit credit in insurance (as we noted earlier). If you happen to live in such a state, improving credit might not directly change your insurance rate – but it will still help your finances overall. And if you ever move or if laws change, you’ll be ready.
Finally, maintaining your good credit is just as important. Think of your credit like a reputation – once you’ve rebuilt it, keep nurturing it. Continue with the good habits: pay bills on time, keep debts low, only use credit when needed. That way, when life events happen, you’ll always get the best rates available, whether for loans or insurance or anything else.
Kudos for Your Credit
Using a tool like Kudos can assist you on this journey. Kudos not only helps manage your credit cards and rewards, but also monitors your credit score in-app. It can send alerts on changes and even suggest personalized credit cards that might help improve your credit .
Plus, once your credit improves, Kudos's insurance comparison can help you quickly find which insurer will give you the best deal for your new credit tier. It’s like a roadmap and toolkit for financial improvement, all in one.
Improving your credit score is one of the best financial moves you can make – and the fact that it can lead to cheaper car insurance is just one of many benefits. Stay focused and proactive, and you’ll see those positive results in your mailbox with each insurance renewal offer.
FAQs – Improving Credit for Better Insurance Rates
How long will it take to improve my credit enough to lower my insurance rate?
It depends on your starting point and what negative items are on your report. If you’re just a bit low on the score, you might get into a better tier within a few months by paying down debt or fixing a small issue. Significant improvements (like going from the 500s to 700s) often take 6–12 months or more of consistent good behavior.
Do insurance companies use the same credit score I see (like FICO)?
No, car insurers typically use a specialized credit-based insurance score rather than the standard FICO or VantageScore you might see on a credit monitoring app. However, the insurance score is derived from your credit report data, so a higher FICO usually means a higher insurance score too.
My credit score went up 50 points! Should I tell my insurer or will they adjust automatically?
Many insurers automatically refresh your credit info at renewal time, so if your renewal is coming up, you might simply see a lower rate offered. However, it won’t hurt to call your agent or insurer and let them know your situation. They may be able to re-run your quote with the updated credit to give you a preview of the new rate.
What credit score should I aim for to get good insurance rates?
Generally, aim for at least a “good” credit range, which is often a FICO score of 670+. Excellent is even better. There’s no hard cutoff universally, but many insurers categorize credit like this: poor, fair, good, excellent. If you can move yourself out of the poor or fair brackets into good or above, you’ll see much better rates.
If my state bans credit in insurance, is there any point in improving my credit?
Absolutely, while in that case your auto insurance rate might not change, improving your credit score has many other benefits. You’ll get better interest rates on loans, higher odds of credit card approvals, lower deposits for utilities or cell plans, etc. It’s also possible you may move to another state or the laws could change in the future, and then your credit would matter for insurance.
Double the Cash, Zero the Worry
Looking for consistent rewards without the hassle? The Citi Double Cash® Card rewards you twice: 1% when you buy, another 1% when you pay—for a total 2% cash back on every purchase with no categories to track. Plus, smart balance transfer options help you take control of existing debt. Simple, powerful, perfect for today's savvy spenders.
Editorial Disclosure: Opinions expressed here are those of Kudos alone, not those of any bank, credit card issuer, hotel, airline, or other entity. This content has not been reviewed, approved or otherwise endorsed by any of the entities included within the post.
