How can I get cheap car insurance with bad credit?

CarInsurance.com data show that drivers with bad credit can save $2,000, or $167 a month, on their yearly policy cost by comparing rates. To find cheap car insurance with bad credit, CarInsurance.com Consumer Analyst Penny Gusner recommends comparing at least three quotes from multiple insurance companies.

Geico is the cheapest car insurance company for drivers with bad credit, based on a CarInsurance.com analysis of up to six major insurers in 10 ZIP codes in each state.

Cheap car insurance companies for drivers with bad credit

Below you’ll see how major carriers compare on rates for bad credit drivers in your state. Enter your state in the search field to see how much rates differ among insurers, which is how much you can potentially save. Rates shown are monthly.

Best cheap car insurance for bad credit drivers

Drivers with bad credit pay, on average, about $1,000 more (71 percent) for car insurance than drivers with good credit, according to CarInsurance.com’s rate analysis. If you live in one of the worst states for drivers with bad credit, you can pay a lot more.

As we’ve established, you can still save money by comparison shopping, even after a credit ding. That’s because insurers use different methods to assess risk and price policies, so no two companies will raise your rates the same amount.

But price isn’t the only thing that differentiates insurance companies. The cheapest car insurance company for drivers with bad credit may not be one that doesn’t review your credit, but simply the one that charges you the least for having bad credit. Here we’ll explain the benefits and drawbacks of comparing rates from a variety of carriers.

Car insurance companies that don’t do credit checks

It may seem like the best way to get cheap car insurance with bad credit is to find an insurance company that doesn’t look at credit scores. But Gusner says that’s not the case.

The few car insurance companies that don’t check credit specialize in high-risk drivers. These drivers cost insurers more than drivers with good credit and clean records, because they are more likely to file more claims that insures have to pay. That means even though these companies skip a credit check, they may still be more expensive than traditional carriers, because their overall costs are higher, which is passed on to you, says Gusner.

"An insurance company that primarily serves low-risk drivers that has a low surcharge for bad credit may be less expensive than a company that primarily serves high-risk drivers and doesn’t do a credit check,” says Gusner.

Insurance companies that don’t account for credit when determining rates are typically smaller, regional carriers that potentially have fewer resources to handle claims, and less cash flow, than the big companies. Gusner’s advice  should you consider one of these companies for coverage:

• Check complaint filings with your state department of insurance website or at the National Association of Insurance Commissioners (NAIC) website.
• Check their financial rating with a company such as A.M Best to be sure they are solvent enough to pay claims. You want to use a company with at least a B+ or A rating, if not higher.

Companies that cater to high-risk drivers but check credit

There are also car insurance companies that serve high-risk drivers that use credit scores. These companies may have comparable rates to traditional carriers, or rates that may be even cheaper. Many of these are separately branded companies owned by major carriers.  Notable ones include:

• Victoria, owned by Nationwide
• Titan, owned by Nationwide
• The General, owned by American Family Insurance
• Bristol West, owned by Farmers

Traditional carriers

Some of the major insurance companies own subsidiaries that focus on high-risk drivers. Geico Casualty, owned by Geico, is one example. Progressive also generally provides high-risk drivers non-standard policies at affordable rates, compared to other big players in the industry, says Gusner.

“When you ask for quotes and go to buy a policy, you do so like any other driver,” she says, “but if deemed high-risk, you’d be assigned to the division that serves those drivers, likely without even knowing it.”

The bottom line is that you can still pay a lower rate with some traditional carriers’ coverage for drivers with bad credit.

Why do insurance companies use credit history?

Since your credit history doesn’t involve driving, you may wonder why do insurance companies require a credit check and how bad credit affects your car insurance rates.

Insurers use the information on your credit report to create their own insurance credit score for you, and use it when pricing coverage. Insurers say their data show a connection between credit history and the filing of claims. People who pay their bills on time, on average, file fewer and less costly claims than those with a lot of late payments or delinquencies. That means drivers with poor credit generally cost insurance companies more money, so they are charged more for coverage.

That’s why those with poor credit typically pay more for car insurance than those with good or excellent credit.

Note that California, Hawaii and Massachusetts do not allow insurance companies to use credit history when setting car insurance rates, but all other states do.