Having a poor credit score can make it more expensive to finance things like an auto or a home. 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 $2,229 more per year, on average, for car insurance.
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
The cheapest insurance companies for policyholders with bad credit are Nationwide, GEICO and Travelers. The carrier that has the most significant premium jump for those with good vs. bad credit is State Farm, which charges $6,669 more, on average, for bad credit.
State Farm has the highest rates among large insurers for drivers with bad credit, with an average annual premium of $8,653. It is followed by Farmers, at $5,049, and Allstate, at $4,177.
| Company | Annual rates | Annual rates with bad credit | $ difference | % increase |
|---|---|---|---|---|
| Nationwide | $1,548 | $2,259 | $711 | 46% |
| GEICO | $1,763 | $3,038 | $1,275 | 72% |
| Travelers | $1,606 | $3,054 | $1,448 | 90% |
| Progressive | $1,998 | $3,405 | $1,407 | 70% |
| Allstate | $2,509 | $4,177 | $1,668 | 66% |
| Farmers | $2,387 | $5,049 | $2,662 | 112% |
| State Farm | $1,984 | $8,653 | $6,669 | 336% |
| USAA* | $1,381 | $2,753 | $1,372 | 99% |
* USAA offers its services only to military members, veterans and their families.
Why is car insurance more expensive for drivers with bad credit?
Drivers with poor credit histories usually pay more for car insurance than those with good credit histories.
“Actuarial studies show that how a person manages his or her financial affairs is a good predictor of insurance claims,” says Mark Friedlander, senior director of media relations for the Insurance Information Institute, or Triple-I.
“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.”
Levon L. Galstyan, a certified public accountant at Oak View Law Group in Auburn, California, says that studies suggest 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.
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.
“A higher credit score often lowers your car insurance rate with almost every company and in nearly every state,” Galstyan says.
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.
Why do insurance companies use your credit score?
Carriers often use credit-based insurance scores because actuarial studies show that how a person manages their financial affairs, which 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 likely the carrier will consider you a risk, which translates into lower premiums.
In addition to your credit-based insurance score, most insurance companies look closely at your driving record, claims history and other factors to determine eligibility for payment plans and premiums.
Tip
If quoting or issuing a policy in California, Hawaii, Massachusetts and Michigan, an insurer cannot use your credit history to set your premium rate. Those states prohibit insurers from using credit history to determine car insurance rates.
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 to the premium you will pay for coverage. But it should not prevent you from obtaining auto insurance coverage in the first place, Friedlander says.
Does getting an insurance quote impact your credit score?
Requesting an auto insurance quote differs from 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 several 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, take the following steps to improve your chances of paying less for car insurance, even if you have fair or poor credit.
Work to improve your credit score
“Spend the next six months to a year improving your credit score to lower your insurance costs,” Galstyan says.
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. Review your three free credit reports every year and contact TransUnion, Experian and Equifax to dispute any errors or inaccuracies you see there.
Contact your 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.
Ask about insurance discounts you may qualify for
You may be eligible for discounts for bundling auto and home, safe driving, anti-theft devices, paying your policy in full, a defensive driving course, multiple vehicles, good/safe driving records, low mileage, paperless billing, loyalty and more.
Enroll in a telematics program
Many carriers offer usage-based discounts if you allow them to track your driving habits with a telematics plug-in device or 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
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 carriers.
Resources & Methodology
Sources
Federal Trade Commission. “Credit-based insurance scores: Impacts on consumers of automobile insurance.” Accessed May 2025.
Methodology
CarInsurance.com commissioned Quadrant Information Services to get car insurance rates for drivers with good and bad credit scores. The rates are based on the sample profiles of 40-year-old male and female drivers carrying full coverage policies with limits of 100/300/100 and $500 collision and comprehensive deductibles. Read the detailed methodology for more information.
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