When it comes to car insurance rates, your driving history, age, gender and credit history demonstrate your risk level to insurance companies. Typically, the higher your credit score and the fewer violations on your record, the lower your premiums will be.
However, if you have poor credit, what rates could you be looking at? It depends. According to the Wisconsin Commissioner of Insurance, insurers believe financially responsible consumers have fewer and less costly losses and should pay less for insurance.
Learn more about how bad credit affects car insurance rates and the differences between rates based on credit.
- Bad credit affects car insurance rates by 80% more than drivers with good credit.
- Car insurance companies create a credit-based rating and use that to assess risk factors for premiums.
- Geico, Nationwide and USAA offer the cheapest car insurance rates for drivers with poor credit.
Why does bad credit affect car insurance rates?
Even with a flawless driving record, you could see a hike in your insurance rate after the insurance company runs a credit check. Insurers use the information on your credit report to create their insurance credit score for you and use it when pricing coverage.
Those with poor credit typically pay more for car insurance than those with good or excellent credit.
Insurers say their data show a connection between credit history and claims filing. They believe consumer credit history is more accurate than driving history, as it can be resolved and wiped clean. Drivers with poor credit generally cost insurance companies more, charging them more for coverage.
Recently, states and opponents of credit-based scoring argued that insurers charge higher rates to some groups — primarily low-income individuals and people of color.
In some instances, even individuals with perfect credit histories are charged more for premiums because they don’t have enough credit history to prove financial stability, according to the National Conference of State Legislatures.
How insurance companies use your credit information
Insurance companies don’t consider the same credit score as lenders. They create their own credit score for drivers using information from your credit history. The credit score used by lenders predicts your ability to repay a loan. A credit-based insurance score indicates whether you’ll file claims.
Insurance companies do, however, create their insurance risk scores based on information from your credit report. The calculations are tweaked a bit but largely reflect your overall credit situation. Typically, a credit score of 700 or higher means your credit-based insurance score won’t be anything to worry about.
Many of the variables used to calculate an insurance score are the same as a standard credit score, such as outstanding debt, length of credit history, new credit applications and type of credit used.
How much does bad credit affect car insurance rates?
Drivers with poor credit will pay, on average, 80% more ($1,462 more a year) for a full coverage policy than drivers with good credit, CarInsurance.com data show. On average, drivers with fair credit pay about $360 more yearly than those with good credit.
California, Hawaii, Michigan and Massachusetts don’t allow insurers to use credit information to set rates. Michigan leads the nation among the worst states for drivers with bad credit.
Several other states — Alabama, Delaware, Florida, Illinois, New Mexico, Oklahoma, Texas, Vermont and Washington — prohibit using a lack of credit history as a factor for premiums – which differs from having a poor credit history.
Cheapest company in each state for car insurance with bad credit
Car insurance costs an average of $1,618 annually for drivers with poor credit. The most popular U.S. insurance companies with the cheapest rates are Geico, Nationwide and USAA. Find more information about your state’s company and average annual rate in the chart below.
| State | Company | Average annual rate with poor credit |
|---|---|---|
| Alaska | Progressive | $1,561 |
| Alabama | Nationwide | $1,483 |
| Arkansas | Geico | $1,508 |
| Arizona | Geico | $1,559 |
| Colorado | Geico | $1,919 |
| Connecticut | Geico | $1,446 |
| Washington, D.C. | Geico | $1,991 |
| Delaware | Geico | $1,598 |
| Florida | Geico | $3,105 |
| Georgia | Nationwide | $1,834 |
| Iowa | Nationwide | $1,262 |
| Idaho | Geico | $981 |
| Illinois | Nationwide | $1,317 |
| Indiana | Geico | $1,036 |
| Kansas | Nationwide | $1,389 |
| Kentucky | Geico | $2,171 |
| Louisiana | USAA | $2,941 |
| Maryland | Geico | $1,804 |
| Maine | Auto-Owners | $1,000 |
| Michigan | Automobile Club of MI (AAA) | $2,969 |
| Minnesota | Nationwide | $1,705 |
| Missouri | USAA | $1,638 |
| Mississippi | Nationwide | $1,810 |
| Montana | Progressive | $1,956 |
| North Carolina | Nationwide | $1,386 |
| North Dakota | USAA | $1,266 |
| Nebraska | Nationwide | $1,502 |
| New Hampshire | Geico | $1,110 |
| New Jersey | New Jersey Manufacturers | $2,229 |
| New Mexico | Geico | $1,590 |
| Nevada | Geico | $1,413 |
| New York | Geico | $1,498 |
| Ohio | Nationwide | $1,093 |
| Oklahoma | Geico | $1,600 |
| Oregon | Geico | $1,506 |
| Pennsylvania | Nationwide | $1,219 |
| Rhode Island | Geico | $2,347 |
| South Carolina | Nationwide | $1,825 |
| South Dakota | Kemper Insurance | $1,389 |
| Tennessee | Nationwide | $1,502 |
| Texas | Nationwide | $1,980 |
| Utah | Geico | $1,442 |
| Virginia | Nationwide | $1,103 |
| Vermont | Geico | $1,157 |
| Washington | USAA | $901 |
| Wisconsin | Geico | $1,318 |
| West Virginia | Nationwide | $1,321 |
| Wyoming | Farmers | $1,993 |
How can I get cheap car insurance with bad credit?
Average car insurance costs by credit score
To better understand how credit ratings impact premiums, the chart below outlines the differences between rates on a monthly, semi-annual and annual basis. This can help you better compare the differences between rates.
For example, on average, drivers with poor credit pay $121 more monthly than those with good credit, equating to $1,462 more annually.
| Rating period | Good credit | Fair credit | Poor credit |
|---|---|---|---|
| Monthly | $160 | $190 | $281 |
| Semi-annual | $958 | $1,138 | $1,689 |
| Annual | $1,915 | $2,275 | $3,377 |
Car insurance for poor credit by company
Shopping for the best car insurance for poor credit can help you find the best rate. Our data experts at CarInsurance.com have compiled a list of some of the top providers nationwide and the average annual rate to help you get started.
Geico, Allstate, Progressive, State Farm and USAA provide insurance coverage in 45 or more states.
| Company | Average annual rate with bad credit |
|---|---|
| North Carolina Farm Bureau | $2,019 |
| Nationwide | $2,042 |
| New Jersey Manufacturers | $2,229 |
| Geico | $2,272 |
| USAA | $2,424 |
| Oklahoma Farm Bureau | $2,876 |
| National General Insurance | $2,886 |
| Erie Insurance | $3,043 |
| American Family | $3,125 |
| Hartford | $3,237 |
| Travelers | $3,254 |
| Mercury Insurance | $3,290 |
| Progressive | $3,364 |
| Shelter | $3,383 |
| Auto-Owners | $3,544 |
| Kemper Insurance | $3,571 |
| Palisades | $3,629 |
| Chubb Ltd | $3,683 |
| Iowa Farm Bureau | $3,781 |
| Automobile Club of MI (AAA) | $4,115 |
| Allstate | $4,118 |
| State Farm | $4,264 |
| Auto Club Entreprises (AAA) | $4,349 |
| Farmers | $4,916 |
| Kentucky Farm Bureau | $7,126 |
| CSAA (AAA) | $9,150 |
The best rates for bad credit car insurance
Each insurance company assesses risk differently, so how much more you pay for various things, such as an accident claim, traffic violation, or, in this case, bad credit, will vary, sometimes significantly.
Below you’ll see how major insurers compare average price increases for drivers with poor credit. The increase is based on the difference between a driver with good credit and one with bad credit.
Car insurance for good and bad credit, by company
While Geico, Nationwide and USAA may offer some of the lowest car insurance rates for drivers with bad credit, National General Insurance and Oklahoma Farm Bureau are the leading insurance companies with the lowest rates compared to drivers with good credit.
National General Insurance offers a $3 rate difference and Oklahoma Farm Bureau is $11 more than their policy for good drivers.
Review more comparable companies to ensure you get the best price in the table below.
| Company | Annual good credit rate | Annual bad credit rate | % increase | $ increase |
|---|---|---|---|---|
| Allstate | $2,513 | $4,118 | 64% | $1,605 |
| American Family | $1,738 | $3,125 | 80% | $1,388 |
| Auto Club Entreprises (AAA) | $2,313 | $4,349 | 88% | $2,036 |
| Auto-Owners | $1,651 | $3,544 | 115% | $1,894 |
| Automobile Club of MI (AAA) | $2,435 | $4,115 | 69% | $1,680 |
| Chubb Ltd | $2,539 | $3,683 | 45% | $1,144 |
| CSAA (AAA) | $3,015 | $9,150 | 204% | $6,135 |
| Erie Insurance | $1,335 | $3,043 | 128% | $1,708 |
| Farmers | $2,740 | $4,916 | 79% | $2,177 |
| Geico | $1,352 | $2,272 | 68% | $920 |
| Hartford | $2,458 | $3,237 | 32% | $780 |
| Iowa Farm Bureau | $2,821 | $3,781 | 34% | $961 |
| Kemper Insurance | $2,604 | $3,571 | 37% | $968 |
| Kentucky Farm Bureau | $2,325 | $7,126 | 206% | $4,800 |
| Mercury Insurance | $2,092 | $3,290 | 57% | $1,198 |
| National General Insurance | $2,883 | $2,886 | 0% | $3 |
| Nationwide | $1,523 | $2,042 | 34% | $519 |
| New Jersey Manufacturers | $1,421 | $2,229 | 57% | $808 |
| North Carolina Farm Bureau | $1,265 | $2,019 | 60% | $753 |
| Oklahoma Farm Bureau | $2,865 | $2,876 | 0% | $11 |
| Palisades | $1,341 | $3,629 | 171% | $2,288 |
| Progressive | $1,933 | $3,364 | 74% | $1,431 |
| Shelter | $1,991 | $3,383 | 70% | $1,391 |
| State Farm | $1,672 | $4,264 | 155% | $2,592 |
| Travelers | $1,882 | $3,254 | 73% | $1,371 |
| USAA | $1,272 | $2,424 | 91% | $1,152 |
How to improve your credit-based insurance score
Using credit to calculate what drivers pay for insurance is a controversial topic, as insurers argue it benefits all drivers by ensuring accurate pricing, while consumer advocates say it’s discriminatory and prevents those who need cheap car insurance the most from getting it.
Still, there are ways to improve your insurance score, which will eventually mean lower rates.
- Pay your bills on time.
- Keep your credit card balances low — the insurance score considers the amount you owe relative to your credit limit, so don’t max out your credit cards.
- Don’t open unnecessary credit accounts.
- Establish and maintain credit.
- Make sure your credit report is accurate — you can request free copies of your credit reports from the three national credit reporting agencies through AnnualCreditReport.com.
If you’re experiencing financial hardship, find free or low-cost help through the nonprofit National Foundation for Credit Counseling.
Your car insurance rates will likely decline as your credit scores improve. If you have seen a positive trend in your scores, consider pricing a new policy by making a car insurance comparison at renewal time.
An excellent way to stay current on your consumer credit scores is to monitor them through a site such as Credit Karma. You can review your credit scores and credit reports for free
FAQ: How does bad credit affect car insurance rates?
Car insurance companies assess driver risk based on many factors, but ultimately, they consider how responsible an individual may be and what type of liability he or she may pose behind the wheel. Often, drivers with poor credit ratings are deemed risky drivers. Here’s what you need to know.
How do I pay less for car insurance as a driver with poor credit?
Shopping for the best car insurance rate and company should be your first step. CarInsurance.com’s analysis shows that Geico and Nationwide lead for some of the most affordable car insurance companies in the U.S. for drivers with poor credit ratings; however, your resident state may have locally-operated companies that can offer you a better rate.
Improving your credit score can also help lower your insurance rate — making timely payments, paying down debt, not using credit cards, etc. Typically, a good credit score ranges between 670 and 739 and a poor to bad credit score is between 300 and 579, according to credit monitoring company Experian.
Insurance scores, however, are not the same as credit scores. Insurance companies use your credit score to create an insurance score that predicts losses and measures how well you manage money.
Do all car insurance companies check credit?
Not all car insurance companies can use credit scores to determine rates. California, Hawaii, Massachusetts and Michigan have prohibited them from doing so.
Some states are working toward banning that lack of credit can be used as an assessment factor. However, outside of these aspects, all major insurance companies will require a credit check as part of a rate quote.
Are there ways to save on insurance as a driver with poor credit?
When looking for car insurance, get quotes for several coverage types and compare costs. For example, you may only need your state’s minimum coverage, saving you money. You should also ask what car insurance discount you qualify for, such as good driver, good student, low annual mileage, education and bundling. Finally, ask what the cost difference is if you pay your entire premium upfront versus monthly.
Resources & Methodology
Sources
- Insurance Information Institute. “Background on Credit scoring.” Accessed June 2023.
- National Conference of State Legislatures. “States Consider Limits on Insurers’ Use of Consumer Credit Info.” Accessed June 2023.
- Wisconsin Office of the Commissioner of Insurance. “Understanding How Insurance Companies Use Credit Information.” Accessed June 2023.
Methodology
The CarInsurance.com editorial team bases its reporting on data it commissioned Quadrant Information Services to gather on average auto insurance rates for more than 34K ZIP codes across the United States. Typically, averages are based on rates for a single, 40-year-old male, with no violations who commutes 12 miles to work each day and has a full-coverage policy with limits of 100/300/100 and a $500 deductible for collision and comprehensive coverage.
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Laura Longero
Executive Editor
Laura Longero is an insurance expert and Executive Editor at CarInsurance.com, where she specializes in helping consumers navigate the complexities of the financial and insurance industries. She has 15 years of experience educating people about finance and car insurance. Prior to joining CarInsurance.com, she worked as a reporter and editor at the USA Today Network. Her expertise provides readers with practical guidance, helping them make informed choices about their financial and insurance needs.
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John McCormick
Editorial Director
John is the editorial director for CarInsurance.com, Insurance.com and Insure.com. Before joining QuinStreet, John was a deputy editor at The Wall Street Journal and had been an editor and reporter at a number of other media outlets where he covered insurance, personal finance, and technology.
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Leslie Kasperowicz
Executive Editor
Leslie Kasperowicz is an insurance educator and content creation professional with nearly two decades of experience first directly in the insurance industry at Farmers Insurance and then as a writer, researcher, and educator for insurance shoppers writing for sites like ExpertInsuranceReviews.com and InsuranceHotline.com and managing content, now at CarInsurance.com.
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Nupur Gambhir
Managing Editor
Nupur Gambhir is a content editor and licensed life, health, and disability insurance expert. She has extensive experience bringing brands to life and has built award-nominated campaigns for travel and tech. Her insurance expertise has been featured in Bloomberg News, Forbes Advisor, CNET, Fortune, Slate, Real Simple, Lifehacker, The Financial Gym, and the end-of-life planning service.