Auto insurance can save a driver’s finances from ruin if they get into an accident, but owning a policy can put their credit scores at risk.
Much has been made about how credit scores can impact car insurance premiums – by more than double in some states, according to insurance marketplace The Zebra – but drivers may not know that their policies can impact their premiums if they’re not managed the right way.
The Independent spoke with several auto insurance experts who talked about how car insurance may or may not affect a credit score.
Past due payments
In general, payments made to a lender show up on a credit report. The more on-time payments a person has, the higher their credit score can go. Timely payments influence around 35 percent of a credit score, making them a top priority for consumers.
Paying insurance premiums is not the same as paying back a loan or credit card, though. That’s why premium payments usually don’t appear on a credit report.
There’s one main exception to that rule, and it can have a big impact on a driver’s credit scores, said Kasey Klenda, an attorney at Missouri-based Shull & Klenda who regularly handles auto insurance claims and disputes.
“If the account is in default and a collection agency gets hold of it, unpaid auto insurance can eventually show up on a consumer's credit report,” Klenda told The Independent.
“Default” and “collections” refer to a pair of situations where an individual doesn’t pay their bill for anywhere from three to six months, according to credit bureau Experian.
At that point, an insurer may not want to chase down the late payments. So, they send the account to a collections agency to do it instead.
If that happens to an auto insurance policy, a driver’s credit score could drop as much as 50 to 100 points or more, according to credit repair service The Credit People. Default and collection marks can stay on a credit report for up to seven years, according to credit bureau Equifax.
A 100-point difference in a credit score will hurt a consumer’s wallet, not just their credit score. A lower credit score typically earns a higher interest rate from lenders.
For example, a driver with a 620 credit score will pay $48,461 more in interest than someone with a 720 credit score for a 30-year, fixed-rate $400,000 mortgage with a 10 percent down payment, according to data from Experian.
Premiums create pressure
The other main way that a car insurance policy can impact a driver’s credit score is through the financial pressure its premiums create.
Consumers are struggling to make ends meet right now, looking for ways to cut back on spending and, in many cases, using credit cards to cover the cost of their everyday expenses.
“We have … seen high auto insurance rates putting a financial strain on customers,” said Maya Afilalo, an industry analyst at auto insurance marketplace AutoInsurance.com. “In our own research, we found that 85 percent of drivers are worried about affording rising auto premiums. It’s clear that high premiums are straining household budgets today.”
A car insurance premium that goes up because of an accident or is part of a scheduled premium increase from an insurer can add unexpected chaos to a driver’s finances.
Rate increases have been particularly drastic in Louisiana and Nevada, where premiums went up 107.8 percent from 2025 to 2026, according to The Zebra. In Louisiana, rates went up 124 percent year on year.
When rates increase, a consumer might be more likely to miss payments on other accounts, said John Espenschied, agency principal and owner at Missouri-based Insurance Brokers Group.
“When you’re dropping a few hundred bucks just to stay on the road, there’s simply less left for credit cards, utilities, or medical bills, so something else is more likely to fall behind,” Espenschied told The Independent by email. “It doesn’t guarantee missed payments, but it definitely raises the odds that another bill gets sacrificed when money’s tight.”
Payments that are 29 days late or less can typically be paid without hurting their credit. Once the payment is 30 days late, there’s a good chance it will appear on a credit report, according to credit bureau TransUnion.
This article is sponsored by Credit Karma. We may earn a commission if you engage with their services using links in this article.
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