Car Insurance For Drivers With Bad Credit in (2024) (2024)

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Almost every state requires drivers to carry liability car insurance, and there are plenty of options for car insurance if you don’t have good credit. That said, the options might be expensive. Depending on your state, having a low credit score can increase your rate by as much as 137%.

According to our rate estimates, a 35-year-old driver with good credit can find car insurance for about $2,008 per year on average. Apoor score increases it further to $3,829 annually. That’s nearly double the cost for poor credit drivers.

Auto Rates Based on Credit Score

Of course, credit score is just one factor insurance companies consider, along with things like your driving history and age. Here’s how having a low credit score can influence rates for 25- and 35-year-old drivers differently.

Some providers may be less expansive than others if you don’t have good credit. While you will probably pay more than you would if you had excellent credit, you don’t have to pay astronomically higher rates.

Cheap Bad Credit Car Insurance Companies

According to our rate estimates, the best companies with cheap auto insurance for those with lower credit scores include USAA, Geico, Nationwide and Progressive.

According to our estimates, drivers pay 46% to 137% more for having poor credit, depending on the state. Each state determines how its car insurance companies can set rates, including how they use a credit-based insurance score. This means having bad credit costs drivers more in some states than others.

Credit Insurance Rates for Good Credit and Bad Credit

Having bad credit in Georgia may raise your rates by about 63%, but having bad credit in Wisconsin can increase your rates by as much as 122%. The table below shows average rate estimates by state for a married 35-year-old driver with both good and poor credit, as well as the premium increase between the two averages.

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The No. 1 thing you can do to find cheaper rates is to shop around as much as possible. Ideally, take a couple of weeks before you need to renew your coverage and compare free quotes from three or more car insurance companies. You can also shop around each time your policy is up for renewal, even if you don’t plan on switching at that time.

Here are a few more ways that might help you save (but do your homework before you opt in):

• Usage-based insurance: Usage-based telematics programs track your driving habits and reward you for safe driving. You could bring down your car insurance rates if you are a cautious driver.

• Pay-per-mile insurance: Other telematics car insurance programs base pricing on your total mileage driven. If you work from home or drive infrequently, you could save money.

• Search for the right discounts: Car insurance discounts and discount amounts vary significantly between companies. Shop around to find the best discounts for your situation, which could include multi-vehicle, student, military or good driver discounts.

Car insurance companies check credit scores when determining car insurance premiums. If you have poor credit, you need more for car insurance coverage. The sections below will discuss why insurers use credit scores when factoring policy costs and what to do if you’ve been turned down for coverage.

Why Car Insurance Companies Check Credit Scores

Let’s make a quick distinction. The credit score you’re familiar with, which you can check through any of the three major credit bureaus, is not exactly what car insurance companies look at. Car insurance companies use a credit-based insurance score to calculate risk.

The credit scoring company FICO developed the credit-based insurance scoring model in the 1990s, and then it and other organizations subjected the score to years of testing. According to FICO, credit-based insurance models “are based on the study of millions of policies and billions of dollars in claims payments from national and regional insurance companies representing all major geographic areas and distribution systems.”

According to the Insurance Information Institute (III), multiple studies have confirmed a high correlation between the credit-based insurance rating and the ratio of claims to premiums for a person.

In other words, the studies found that people with low credit scores cost insurance companies more in claims compared to people with higher scores. According to the III, today, 95% of both home and auto insurance companies use the model to predict risk.

Credit Score vs. Credit-Based Insurance Score

So what’s the difference between credit scores and credit-based insurance scores?

Both models pull information from your credit report, but they weigh aspects slightly differently. Here’s how FICO’s credit-based insurance score and credit score compare, according to the National Association of Insurance Commissioners and FICO.

You can see that FICO’s credit-based insurance score puts more weight on payment history and less on credit mix. Besides this, both scores also have different ranges. FICO’s standard credit scores range from 300 to 850, while its credit-based insurance score ranges from 100 to 900, according to Experian.

Credit-based insurance scores are not available to the public. However, both scores are similar in how they operate. Basically, if you have a low credit score, you also have a low credit-based insurance score.

Which Car Insurance Companies Don’t Check Credit?

Whether an insurer checks credit scores will depend on the state in which you live rather than the company itself.

Every state except California, Hawaii and Massachusetts allows companies to use credit-based insurance scores as a rate factor. If you live in one of those three states, the car insurance company is not allowed to use your credit data to set your rate.

However, if you aren’t among the lucky few, there’s no way to know for sure how much your credit score affects what you pay for car insurance. This is because companies don’t disclose the exact factors they used to calculate rates or how much they weigh each of those factors. This is why it’s important to compare car insurance quotes from multiple providers when you shop.

And don’t worry, checking multiple quotes won’t affect your credit score. Car insurance companies use soft inquiries when checking the credit scores of potential policyholders.

What To Do If You’ve Been Turned Down for Poor Credit

In some situations, you might find that car insurance companies are declining to cover you or charging you unreasonably high prices because of your poor credit rating. If this happens multiple times, you have the right to get car insurance through your state’s assigned risk pool.

States require car insurance companies to take on a portion of high-risk drivers, including people with very bad credit. Each state does this differently, but you can usually work through an agent at a company that has just turned you down to access the assigned risk pool.

Simply speak to an agent at an insurance company and tell them that you need coverage through the assigned risk pool. The agent will be able to either sell you their own high-risk insurance or connect you to another company that can provide you coverage.

Because consumers rely on us to provide objective and accurate information, we created a comprehensive rating system to formulate our rankings of the best car insurance companies. We collected data on dozens of auto insurance providers to grade the companies on a wide range of ranking factors. The end result was an overall rating for each provider, with the insurers that scored the most points topping the list.

Here are the factors our ratings take into account:

• Cost: Auto insurance rate estimates generated by Quadrant Information Services and discount opportunities were both taken into consideration.
• Coverage: Companies that offer a variety of choices for insurance coverage are more likely to meet consumer needs.
• Reputation and experience: Our research team considered market share, ratings from industry experts and years in business when giving this score.
• Availability: Auto insurance companies with greater state availability and few eligibility requirements scored highest in this category.
• Customer experience: This score is based on volume of complaints reported by the NAIC and customer satisfaction ratings reported by J.D. Power. We also considered the responsiveness, friendliness and helpfulness of each insurance company’s customer service team based on our own shopper analysis.

Our credentials:

• 800 hours researched
• 45 companies reviewed
• 8,500+ consumers surveyed

*Data accurate at time of publication.