Having a poor credit score can make it more costly to get financing for things like an auto or mortgage loan. But it can also lead to higher car insurance premiums because carriers regard customers with credit issues as riskier prospects. If you have bad credit, you’ll pay $963 more per year, on average, for car insurance.

“You cannot be denied coverage solely based on your credit score. But a bad score can make your rates extremely high,” says Carter Seuthe, CEO of Credit Summit.

Here’s what you need to know about auto insurance for bad credit, companies that don’t check credit scores and whether getting car insurance quotes affects your credit.

Who has the cheapest car insurance for drivers with bad credit?

It can be challenging to find affordable car insurance if your credit is poor. But we’ve made it easier to shop around and compare carriers by listing what they typically charge for a policyholder with bad credit vs. clean credit. 

Average annual rates for good credit vs. bad credit

Based on 2022 CarInsurance.com data, the most affordable carriers for policyholders with bad credit are Nationwide, Geico and USAA. The carrier that has the biggest premium jump in its rate for those with good vs. bad credit is Farmers, which charges $1,890 more, on average, for bad credit.  

Farmers has the highest rates among large insurers for drivers with bad credit at an average annual premium of $4,630, followed by Allstate at $3,565 and Kemper at $3,274.

Average annual insurance premiums with bad credit
Company Average annual premium Average annual premium with bad credit $ difference
American Family$1,738$2,570$833
State Farm$1,672$3,230$1,558

Why is car insurance more expensive for drivers with bad credit?

It’s a known fact in the insurance industry: Drivers with a poor credit history usually pay more for car insurance than those with a good credit history.

“Actuarial studies show that how a person manages his or her financial affairs is a good predictor of insurance claims,” says Mark Friedlander, director of corporate communications for the Insurance Information Institute, a nonprofit think tank.

“But insurers don’t actually use credit scores or credit ratings to determine insurance costs. Rather, they use proprietary credit-based insurance scores. These are confidential numerical ratings based in whole or in part on a consumer’s credit history.”

Personal finance expert Levon Galstyan, a certified public accountant with Oak View Law Group, notes that research – such as a frequently cited Federal Trade Commission report – suggests a link between the number and cost of claims and a driver’s credit score.

“According to this logic, drivers with bad credit are considered higher risks. That means they are more likely to file claims, pay their premiums late or stop paying their premiums entirely. Based on one study, having a poor credit score raises insurance rates by 59% compared to having average credit,” Galstyan says.

Insurance scores vs. credit scores: What’s the difference?

It’s important to know that insurance scores are not the same as credit scores. Insurance scores predict insurance losses, and credit scores predict credit delinquency.

“Although both are based on a person’s credit history, an insurance score does not measure how much money a consumer makes. Rather, it serves to measure how well an individual manages their money,” Friedlander says.

“Emphasis is placed on those items associated with credit management patterns proven to correlate most closely with insurance risk. These include outstanding debt, length of credit history, late payments, collections and bankruptcies and new applications for credit.”

What is a good credit score for insurance?

A good credit score typically ranges between 670 and 739 or higher; a poor to bad credit score falls between 300 and 579, according to Galstyan: “A higher credit score often lowers your car insurance rate with almost every company and in nearly every state.”

But your FICO credit score isn’t the same as your credit-based insurance score, which more directly impacts the rate you’ll pay. While you may not be able to learn your insurance score, it can still be helpful to know your FICO credit score so that you can work to improve it if it’s low.

“You want to aim for a credit score of 700 or higher to get the best rates. But having at least 670 for many insurance companies will still get you good rates,” Seuthe says.

Why do insurance companies use your credit?

Insurance companies often use credit-based insurance scores because actuarial studies show that how a person manages their financial affairs, which is what these scores indicate, is a good predictor of insurance claims.

“Statistically, people with a poor insurance score are more likely to file a claim. This allows carriers to better match insurance premiums with the risk that an individual insured might pose, helping prevent better risks from subsidizing bad risks,” Friedlander says.

In other words, the better your credit and the higher your credit score, the less you are seen as a risk to the carrier, which translates into lower premiums.

In addition to your credit-based insurance score, most insurance companies look closely at your driving history, claims history, and a variety of other factors to determine eligibility for payment plans and insurance rates.

Keep in mind that if a carrier is quoting or issuing a policy in California, Hawaii, Massachusetts and Michigan, it isn’t allowed to use your credit history to set your premium rate. Those states prohibit insurers from using credit history to determine car insurance rates.

Check out our detailed guide on why car insurance companies require a credit check

Are there insurance companies that don’t use credit scores?

Not all auto insurance companies base their rates on credit-based insurance scores. But most carriers do. When shopping around for a policy, you can ask a given insurer if they use credit-based insurance scores and how impactful these scores are in determining your rate.

Be aware, too, that a car insurance company will likely perform a credit check when quoting you a rate.

“Obtaining car insurance with no credit check from a company should raise a few red flags. Companies usually want to be aware of a driver’s credit score. If they don’t, chances are they don’t mind breaking other rules, too,” Galstyan says.

Can you be denied car insurance because of your credit score?

Bad credit history could be detrimental regarding the premium you will pay for coverage. But it should not prevent you from obtaining auto insurance coverage in the first place, Friedlander says.

Learn more about how bad credit affects car insurance rates

Does getting an insurance quote impact your credit score?

Requesting an auto insurance quote is not the same as applying for a new loan or credit card, which could negatively affect your credit score/rating.

“When car insurance companies give you a quote, they perform what is known as a ‘soft pull,’ which is a type of inquiry that does not affect your credit score or credit rating,” Galstyan says. “These inquiries will appear on your personal credit reports, but that’s all. They are hidden from lenders and have no impact on your credit score.”

How can you save on car insurance when you have bad credit?

Even if your credit is undesirable, you should still request car insurance quotes from different insurers and compare carriers and coverages carefully.

“Get at least three quotes from national and regional insurers to compare pricing for the same level of coverage,” Friedlander says.

Additionally, pursue these steps to improve your chances of paying less for car insurance – even if you are credit-challenged:

Work to improve your credit score

“Spend the next six months to a year improving your credit score to lower your insurance costs,” Galstyan advises. This means paying your bills on time and in full without missing any payments, refraining from applying for new credit, and not maxing out your credit limit. It also involves reviewing your three free credit reports and contacting TransUnion, Experian and Equifax to dispute any errors or inaccuracies you see there.

Contact the carrier to explain your credit situation

“If your credit score is lower than desired or your credit history includes late payments, and you are worried that these factors will trigger higher premiums, contact the insurer directly. A low credit score does not necessarily imply irresponsibility. Your credit score may have dropped if you were laid off, fell behind on bills, or were out of work for medical reasons,” Galstyan says.

Inquire about insurance discounts

You may be eligible for a bundled policy, safe driving, anti-theft device, pay-in-full, defensive driving course, multi-vehicle, clean driving record, low-mileage, paperless or loyalty discount.

Check out our detailed guide on which car insurance discounts can you qualify for

Enroll in a telematics program with your insurer

Many carriers offer usage-based discounts if you permit them to track your driving habits with a telematics plug-in device or using a mobile app.

Explore a group insurance plan

“Some companies offer reductions to drivers who get insurance through a group plan from their employer or through professional, business, or alumni groups or other associations. Ask your employer and inquire with groups or clubs you are a member of to see if this is possible,” Friedlander says.

Final thoughts on car insurance for drivers with bad credit

Don’t let a weak credit score or negative credit history deter you from attempting to get auto insurance or trying to pay less for a policy. Your compromised credit doesn’t have to be a black mark of shame.

While you should strive to better your credit score and resolve any problems you notice on your credit reports, be aware that no matter how low your score you won’t be prevented from getting auto insurance coverage. Just expect to pay more until your credit improves.

Meanwhile, pursue discounts you may be eligible for and request quotes from several different carriers. This can minimize the sting of higher premiums triggered by credit deficiencies.

Learn more about which are the worst states for drivers with bad credit

Resources & Methodology


  1. Federal Trade Commission. “Credit-based insurance scores: Impacts on consumers of automobile insurance.” Accessed September 2022.
  2. AnnualCreditReport.com. “Free credit reports.” Accessed September 2022.


CarInsurance.com commissioned Quadrant Information Services to pull rates in 2022 for a 40-year-old male driver with a good driving record, 12-mile commute to work and full coverage insurance.

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Contributing Researcher

Erik J. Martin is a Chicago area-based freelance writer whose articles have been published by AARP The Magazine, The Motley Fool, The Costco Connection, USAA, US Chamber of Commerce, Bankrate, The Chicago Tribune, and other publications. He often writes on topics related to insurance, real estate, personal finance, business, technology, health care, and entertainment. Erik also hosts a podcast and publishes several blogs, including Martinspiration.com and Cineversegroup.com.