How does bad credit affect car insurance rates?

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.

ZIP Code Please enter valid ZIP

Get Quotes

Contents

Table of Contents

Table of Contents

• What is a credit-based insurance score?
• Car insurance for good and bad credit
• Average car insurance costs by credit score 
• How car insurance companies use your credit score
• Cheapest company in each state for car insurance with bad credit 
• Rates by state for car insurance with bad credit
• How to improve your credit-based insurance score
• FAQ: How does bad credit affect car insurance rates?
• Resources & Methodology

What is a credit-based insurance score?

Your credit-based insurance score is a rating that insurers use when setting your premiums. It is not the same as your credit score; not every state allows insurers to base their pricing on it. 

While your credit score helps lenders determine your creditworthiness and interest rates, your credit-based insurance score measures your risk to the lender. A credit-based insurance score uses your credit history to determine your risk profile, including how likely you are to file a claim on your policy and how costly that claim might be for the insurance company. 

This score typically considers your payment history, credit types and your existing debt. It also considers whether you’ve pursued new credit lines recently and how long you’ve had credit.

Car insurance for good and bad credit

The cost you pay for car insurance can vary widely depending on whether you have bad, fair or good credit. Drivers with good credit pay the least, while bad-credit drivers pay the most; those with fair credit fall in between. 

Our analysis found that if you have poor credit, your insurance premiums could be significantly more expensive than those of someone with a good credit score, about $2,229 more annually, 117% more. Drivers with fair credit pay $528 more per year than drivers with good credit.

FICO Score, or credit score, ranges are as follows:

• Poor: Under 580
• Fair: 580-669
• Good: 670-739
• Very good: 740-799
• Exceptional: 800+

Below, we’ve compared the average annual rate for car insurance by credit for each state so you can see the difference your credit profile can make.

Average car insurance costs by credit score 

If you have bad credit, you’ll pay $2,229 more per year, on average, for car insurance. Car insurance costs 117% more for drivers with bad credit compared to those with good credit.

On average, drivers with fair credit pay about $528, or 70%, more each year than those with good credit. 

How car insurance companies use your credit score

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 those used to calculate a standard credit score, such as outstanding debt, length of credit history, new credit applications and type of credit used.

Cheapest company in each state for car insurance with bad credit 

Car insurance costs an average of $4,126 annually for drivers with poor credit. Some U.S. insurance companies with the cheapest rates are GEICO, Nationwide, Progressive, Travelers and USAA. Find more information about average annual rates by company in your state in the chart below.

Note: 

• $ difference – Difference from the state average for bad credit 
• % difference – Difference from the state average for bad credit 

Rates by state for car insurance with bad credit

While GEICO, Nationwide, Travelers and USAA may offer some of the lowest car insurance rates for drivers with bad credit nationwide, smaller regional carriers might offer the lowest rates compared to drivers with good credit in some states. 

The average rate at Oklahoma Farm Bureau is $14 more than their policy for good drivers and State Farm offers a $122 rate difference for drivers with bad credit in Wisconsin. 

Review more comparable companies to ensure you get the best price in the table below.

Note: 

• Note: USAA is only available to military community members and their families.
• $ difference – Difference from the state average for bad credit 
• % difference – Difference from the state average for bad credit 

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. 

“Generally speaking, if one improves their credit score, their insurance score should also increase,” said Benjamin Bruinekool, principal at Western Michigan Insurance Agency. “To drill it down further, I would recommend focusing on payment history and credit utilization,” he said.

Here’s how to do that:

• 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. Still, 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.

Resources & Methodology

Sources

1. National Association of Insurance Commissioners. “Credit-Based Insurance Scores.” Accessed June 2025.
2. National Association of Insurance Commissioners. “Credit-Based Insurance Scores Aren’t the Same as a Credit Score. Understand How Credit and Other Factors Determine Your Premiums.” Accessed June 2025.
3. National Conference of State Legislatures. “States Consider Limits on Insurers’ Use of Consumer Credit Info.” Accessed June 2025.
4. United Policyholders. “Should states ban credit-based insurance scoring?” Accessed June 2025.
5. Urban Institute. “Young Adults’ Credit Trajectories Vary Widely by Race and Ethnicity.” Accessed June 2025.

Methodology

CarInsurance.com editors in 2023 collected rates from Quadrant Information Services for 40-year-old males and females driving a Honda Accord LX with a poor insurance score for a full coverage insurance policy with limits 100/300/100 and $500 comprehensive and collision deductible. We analyzed 5,073,544 records, 1468 ZIP codes and 138 insurance companies nationwide.

Still have a question? Ask our experts

Get advice from an experienced insurance professional. Our experts will help you navigate your insurance questions with clarity and confidence.

Browse all FAQs

Your Question Please enter a valid input Min 50 to max 250 characters are allowed. Only (& ? , .) charcters are allowed.

Your Email Address

All information provided will remain confidential.

Please enter a valid input

Ask our experts

Browse all FAQ’s >>

Error: Security check failed

Thank You, Your message has been received. Our team of auto insurance experts typically answers questions within five working days. Note that due to the volume of questions we receive, not all may be answered. You are a bot!

↻ Ask another question

Meet our editorial team

Katrina Raenell Contributing Researcher

Katrina Raenell is a writer, editor and educator with 20 years of experience in content and communications for international organizations, nonprofits and start-ups. In her previous roles, she was a communications manager for study abroad, content project manager for higher education and finance websites, reported on arts and culture, and was a managing editor for an online health and wellness publication.

Read full bio

Laura Longero Executive Editor

Laura Longero is an insurance expert with more than 15 years of experience educating people about personal finance topics and helping consumers navigate the complexities of auto insurance. She writes and edits for QuinStreet’s CarInsurance.com, Insurance.com and Insure.com. Prior to joining QuinStreet, she worked as a reporter and editor at the USA Today Network.

Read full bio