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Worst states for drivers with bad credit

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Drivers with poor credit pay a rate that is 71 percent higher on average than a driver with good credit. That’s about $1,000 more a year, a new CarInsurance.com rate analysis shows. It’s more than twice as much as the average premium hike (32 percent, or $455 annually) for an accident, according to CarInsurance.com’s data.

That’s right, missing credit card payments could result in your auto insurance rates rising higher than if you crashed your car.

Top 5 worst states for drivers with bad credit

The situation is much worse in some states. For example, in the following states, drivers with bad credit will pay a rate that is higher by:

  • Michigan: 167 percent
  • New Jersey: 106 percent
  • Arizona: 94 percent
  • Texas: 93 percent
  • Utah: 91 percent

In nine other states, drivers with bad credit pay an average of least 75 percent more than drivers with good credit.

StateAverage rateRate with poor credit% increase$ increase
Michigan$2,368$6,316167%$3,948
New Jersey$1,419$2,925106%$1,506
Arizona$1,399$2,71194%$1,312
Texas$1,644$3,17093%$1,526
Utah$1,212$2,31691%$1,104
Nevada$1,578$2,98689%$1,408
Illinois$1,176$2,19887%$1,022
New York$1,214$2,25586%$1,041
Minnesota$1,339$2,47185%$1,132
Pennsylvania$1,438$2,57279%$1,134
Vermont$1,166$2,07078%$904
South Carolina$1,353$2,38676%$1,033
Alabama$1,304$2,29676%$992
Tennessee$1,339$2,34275%$1,003
Florida$2,250$3,92674%$1,676
Maine$884$1,54074%$656
Rhode Island$2,011$3,49674%$1,485
Montana$1,589$2,75673%$1,167
Colorado$1,675$2,89073%$1,215
Kentucky$1,611$2,76672%$1,155
Nebraska$1,287$2,20371%$916
Idaho$1,019$1,74271%$723
Indiana$1,057$1,80671%$749
Missouri$1,288$2,19771%$909
Louisiana$2,228$3,79770%$1,569
Delaware$1,838$3,12870%$1,290
South Dakota$1,250$2,11970%$869
Arkansas$1,556$2,62168%$1,065
Oklahoma$1,469$2,46868%$999
Ohio$959$1,61068%$651
Georgia$1,815$3,04067%$1,225
DC$1,887$3,15367%$1,266
North Dakota$1,123$1,87367%$750
Oregon$1,325$2,19366%$868
Kansas$1,412$2,32064%$908
Washington$1,307$2,11762%$810
Iowa$1,073$1,72861%$655
Virginia$993$1,59561%$602
New Mexico$1,498$2,40460%$906
Maryland$1,541$2,46460%$923
Wisconsin$1,147$1,83260%$685
New Hampshire$1,156$1,84660%$690
Mississippi$1,504$2,35857%$854
Connecticut$1,980$3,09556%$1,115
West Virginia$1,467$2,16748%$700
Alaska$1,246$1,78944%$543
Wyoming$1,577$2,17938%$602
North Carolina$1,170$1,31713%$147
California$1,783$1,7830%$0
Hawaii$1,255$1,2550%$0
Massachusetts$1,616$1,6160%$0

Why Michigan tops the list

There are multiple factors driving insurance costs in Michigan that go beyond poor credit,  says Dyck Van Koevering, general counsel of the Insurance Alliance of Michigan. That includes a law requiring drivers to purchase unlimited, lifetime medical benefits with their auto insurance.

“This one-of-a-kind mandate is driving up the cost of auto insurance for drivers across the state, making Michigan the most expeWorst states for drivers with bad credit, key data pointsnsive state in the nation for auto insurance,” he says.

He also notes that drivers in neighboring states such as Ohio and Indiana – which also use credit information for setting insurance rates – pay only half as much for insurance as drivers in Michigan.

How insurance companies use your credit history information

Technically, insurers don’t use your credit score to determine your rates. Instead, they calculate what is known as a “credit-based insurance score” using the information contained on your credit report.

Both scores are based on information in a credit report, but “they predict very different things,” says Christine O’Brien, president of the Insurance Council of New Jersey.

While a credit score predicts the likelihood that a person will repay what is borrowed through loans and credit cards, a credit-based insurance score predicts the likelihood that a person will have future accidents or file claims.

Why do car insurance companies use credit scores?

Most insurers use credit-based insurance scores as a way of gauging the risk that a policyholder might pose. Ninety percent of car insurance companies nationwide use credit information when determining insurance rates, according to the National Association of Insurance Commissioners.

“Research has shown that people who manage their credit well have fewer insurance claims,” says Lynne McChristian, a communications consultant with the Insurance Information Institute.

For example, a 2018 study by the Texas Department of Insurance analyzed policyholder data and found a "strong relationship" between poor credit scores and a higher level of insurance claim activity. Typically, drivers with the worst credit scores file 1.5 to 2 times more claims than those with the best credit scores, says Ben Gonzalez, of the Texas Department of Insurance public affairs office.

That’s likely because people with high credit scores may be less likely to file relatively small claims. For example, if you caused $2,000 in damage to someone’s car, you might opt to pay out of pocket to keep your rates from rising. Someone with a lower credit score might not have the resources to do that, Gonzalez says.

States that don’t use credit scores

It’s important to note that some states don’t use your credit information in setting rates. Three states – California, Hawaii and Massachusetts – have laws that prevent insurance companies from using your credit information to determine your rates.  

Other states may have certain protections that prevent your credit record from impacting your auto insurance rates in some circumstances.

For example, O’Brien says the New Jersey Department of Banking and Insurance requires insurers to provide exceptions for consumers whose credit information has been hurt by extraordinary life events, such as:

  • Catastrophic illness or injury
  • Death of a spouse, child or parent
  • Temporary loss of employment
  • Divorce
  • Identity theft

 

What’s the best type of car insurance company for bad credit?

While you work to improve your credit, it pays to shop around for auto insurance coverage, because you can still save money, even if you’re considered a high-risk driver. CarInsurance.com data show that drivers with bad credit can trim $2,000 from their yearly policy cost, on average.

Insurers use different methods to assess risk and price policies, so no two companies will raise your rates the same amount. By comparing rates from multiple carriers, you can see which one has the lowest price. But not all insurance companies are the same. Here we’ll explain the benefits and drawbacks of comparing rates from a variety of carriers.

Companies that don’t do credit checks

For drivers with bad credit, it may seem like the best way to get cheap rates is to find an insurance company that doesn’t look at credit scores. That’s not typically the best route to take.

Auto insurers who 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, says Penny Gusner, CarInsurance.com consumer analyst.

“If you have bad credit, the best way to find the cheapest rates is to compare quotes from traditional companies as well as those that cater to high-risk drivers,” says Gusner. “Each insurer uses its own formula to set rates. So a traditional company 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.”

Insurance companies that don’t account for credit when determining rates are typically smaller, regional carriers that have fewer resources than the big companies. Gusner says be sure to check complaint filings with your state department of insurance website or at the National Association of Insurance Commissioners (NAIC) website. “And be sure to check their financial rating with a company such as A.M Best to be sure they are solvent enough to pay claims,” says Gusner.

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.

You’ll see in the table below that Geico’s national average rate for drivers with bad credit is the cheapest among insurers studied by CarInsurance.com.

Bad credit car insurance rates by company

Cheapest car insurance companies for bad credit: Comparing rates to save

To find the best rate, Gusner recommends getting at least three price quotes from multiple insurance companies.  CarInsurance.com’s rate analysis found that drivers with bad credit can save, on average, $167 a month by comparing rates.

“Credit checks by car insurance companies are considered a ‘soft pull,’ so they don’t affect your credit score,” says Gusner. “That means you can compare quotes from multiple insurers without having your credit score dinged.”

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 you can save.

StateCompanyMonthly rate with bad credit
AlaskaState Farm Mutual Auto$128
AlaskaGEICO General$137
AlaskaProgressive Direct$167
AlaskaProgressive Specialty$198
AlabamaGEICO Cas$91
AlabamaGEICO General$108
AlabamaNationwide Mutual Fire$169
AlabamaAllstate P&C$185
AlabamaMid-Century Ins Co$201
AlabamaProgressive Specialty$254
AlabamaState Farm Mutual Auto$331
ArkansasGEICO General$154
ArkansasFarmers Ins Co$193
ArkansasState Farm Mutual Auto$198
ArkansasNationwide Mutual$230
ArkansasAllstate P&C$253
ArkansasProgressive NorthWestern$284
ArizonaGEICO General$96
ArizonaGEICO Cas$119
ArizonaProgressive Advance Ins$172
ArizonaNICOA PPNM$233
ArizonaFarmers Ins Co of AZ$258
ArizonaAllstate F&C$299
ArizonaState Farm Mutual Auto$406
ColoradoGEICO Cas$122
ColoradoState Farm Mutual Auto$197
ColoradoAMCO Insurance$207
ColoradoGEICO General$260
ColoradoProgressive Direct$280
ColoradoAllstate F&C$299
ColoradoFarmers Ins Exchange 2.0$320
ConnecticutGEICO General$142
ConnecticutState Farm Mutual Auto$193
ConnecticutNationwide Mutual$233
ConnecticutProgressive Casualty$273
ConnecticutAllstate F&C$322
ConnecticutForemost Ins Co. Grand Rapids$386
DCGEICO General$139
DCState Farm Mutual Auto$256
DCNICOA$272
DCProgressive Direct$291
DCAllstate P&C$356
DelawareGEICO General$178
DelawareProgressive Direct$230
DelawareNationwide Mutual$246
DelawareState Farm Mutual Auto$298
DelawareAllstate P&C$351
FloridaState Farm Mutual Auto$225
FloridaGEICO General$265
Florida21st Century Centennial$279
FloridaAllied P&C PPCM$316
FloridaAllstate F&C$434
FloridaProgressive Select$444
GeorgiaGEICO General$151
GeorgiaProgressive Premier$228
GeorgiaProgressive Mountain$240
GeorgiaNationwide Mutual$269
GeorgiaAllstate F&C$300
GeorgiaState Farm Mutual Auto$332
IowaGEICO Cas$85
IowaGEICO General$123
IowaNationwide Agribusiness Ins$127
IowaProgressive Universal$133
IowaState Farm Mutual Auto$151
IowaFarmers Ins Co$159
IowaProgressive Northern$175
IowaAllstate F&C$198
IdahoGEICO General$91
IdahoState Farm Mutual Auto$109
IdahoFarmers Ins Co Of ID$138
IdahoAllied Depositors PPXM$142
IdahoProgressive NorthWestern$183
IdahoAllstate F&C$209
IllinoisGEICO Cas$130
IllinoisGEICO General$147
IllinoisState Farm Mutual Auto$152
IllinoisProgressive Northern$184
IllinoisIllinois Farmers Ins Co$216
IllinoisAllstate F&C$271
IndianaGEICO Cas$76
IndianaNationwide Mutual$100
IndianaProgressive Paloverde$147
IndianaState Farm Mutual Auto$175
IndianaIllinois Farmers Ins 2.0$193
IndianaAllstate P&C$212
KansasAllied NW Affin PPBM$130
KansasGEICO General$140
KansasState Farm Mutual Auto$188
KansasFarmers Ins Co$211
KansasAllstate F&C$238
KansasProgressive NorthWestern$253
KentuckyState Farm Mutual Auto$185
KentuckyGEICO General$188
KentuckyProgressive Direct$218
KentuckyNationwide P&C$264
KentuckyAllstate P&C$297
LouisianaGEICO Cas$173
LouisianaState Farm Mutual Auto$313
LouisianaAllstate P&C$339
LouisianaProgressive Security Ins.$441
MarylandGEICO Cas$120
MarylandState Farm Mutual Auto$203
MarylandProgressive Select$215
MarylandNAICOA$241
MarylandAllstate Indemnity$247
MaineGEICO General$62
MaineUnited Financial Casualty$117
MaineState Farm Mutual Auto$135
MaineProgressive NorthWestern$160
MaineAllstate F&C$168
MichiganGEICO Ind$177
MichiganProgressive Marathon$277
MichiganState Farm Mutual Auto$603
MichiganFarmers Ins Exch$709
MichiganAllstate F&C$866
MinnesotaState Farm Mutual Auto$152
MinnesotaGEICO General$167
MinnesotaAllied P&C$183
MinnesotaProgressive Preferred$210
MinnesotaIllinois Farmers Ins$215
MinnesotaAllstate Indemnity$309
MissouriGEICO General$131
MissouriGEICO Cas$137
MissouriState Farm Mutual Auto$153
MissouriAllied P&C PPCM$156
MissouriFarmers Ins Co$214
MissouriProgressive Casualty$232
MissouriAllstate F&C$259
MississippiGEICO General$134
MississippiNationwide P&C$171
MississippiState Farm Mutual Auto$192
MississippiAllstate P&C$240
MississippiProgressive Gulf Ins$245
MontanaGEICO General$161
MontanaState Farm Mutual Auto$170
MontanaAllied Depositors PPXM$229
MontanaAllstate F&C$246
MontanaMid-Century Ins Co$277
MontanaProgressive NorthWestern$295
North CarolinaGEICO Govt Employees$89
North CarolinaProgressive Southeastern$99
North CarolinaNationwide Mutual$108
North CarolinaAllstate P&C$126
North CarolinaState Farm Mutual Auto$126
North DakotaGEICO General$91
North DakotaAllied P&C PPCM$130
North DakotaMid-Century Ins Co$143
North DakotaState Farm Mutual Auto$159
North DakotaProgressive NorthWestern$188
North DakotaAllstate Insurance$226
NebraskaGEICO General$114
NebraskaAllied P&C$130
NebraskaState Farm Mutual Auto$171
NebraskaAllstate F&C$202
NebraskaMid-Century Ins Co$204
NebraskaProgressive Northern$281
New HampshireGEICO General$90
New HampshireProgressive Universal$120
New HampshireNationwide Mutual$132
New HampshireState Farm Mutual Auto$134
New HampshireAllstate F&C$191
New HampshireProgressive Northern$256
New Jersey21st Century Centennial Ins Co$183
New JerseyProg Garden State Ins Co$201
New JerseyGEICO Govt Employees$220
New JerseyState Farm Ind$303
New JerseyAllstate NJ P&C$313
New MexicoProgressive Direct$154
New MexicoState Farm Mutual Auto$166
New MexicoGEICO General$192
New MexicoAllied AMCO$196
New MexicoProgressive Northern$205
New MexicoFarmers Ins Co of AZ$218
New MexicoAllstate F&C$270
NevadaGEICO Cas$132
NevadaVictoria F&C$183
NevadaProgressive Northern$234
NevadaMid-Century Ins Co$252
NevadaAllstate F&C$287
NevadaState Farm Mutual Auto$406
New YorkGEICO General$103
New YorkAllstate F&C$120
New YorkState Farm Mutual Auto$236
New YorkProgressive Casualty$293
OhioGEICO Cas$61
OhioNationwide Mutual$112
OhioGEICO General$125
OhioProgressive Direct$131
OhioState Farm Mutual Auto$137
OhioFarmers Ins of Columbus$152
OhioProgressive Specialty$167
OhioAllstate F&C$188
OklahomaGEICO Cas$126
OklahomaGEICO General$179
OklahomaState Farm Mutual Auto$194
OklahomaFarmers Ins Co$222
OklahomaAllstate F&C$234
OklahomaProgressive Northern$280
OregonGEICO Cas$104
OregonGEICO General$130
OregonState Farm Mutual Auto$170
OregonFarmers Ins Co Of OR$193
OregonProgressive Universal$204
OregonNICOA$231
OregonAllstate F&C$248
PennsylvaniaGEICO General$124
PennsylvaniaGEICO Cas$137
PennsylvaniaNationwide Property & Casualty$170
PennsylvaniaState Farm Mutual Auto$172
PennsylvaniaProgressive Advanced$230
PennsylvaniaAllstate F&C$289
PennsylvaniaProgressive Specialty$378
Rhode IslandState Farm Mutual Auto$186
Rhode IslandNationwide Mutual$235
Rhode IslandGEICO General$251
Rhode IslandProgressive Direct$286
Rhode IslandAllstate F&C$382
Rhode IslandProgressive Casualty$409
South CarolinaNationwide Mutual Fire$151
South CarolinaState Farm Mutual Auto$197
South CarolinaGEICO Govt Employees$205
South CarolinaProgressive Northern$213
South CarolinaAllstate F&C$228
South DakotaGEICO General$141
South DakotaAllied AMCO PPAM$151
South DakotaMid-Century Ins Co$165
South DakotaState Farm Mutual Auto$178
South DakotaProgressive Northern$212
South DakotaAllstate Insurance$213
TennesseeGEICO General$152
TennesseeMountain Laurel Assurance$160
TennesseeState Farm Mutual Auto$166
TennesseeProgressive Hawaii$199
TennesseeNationwide Mutual$216
TennesseeMid-Century Ins Co$217
TennesseeAllstate P&C$256
TexasState Farm Mutual Auto$195
TexasProgressive Cty Mtl$247
TexasNationwide CCMIC$251
TexasGEICO County Mutual Ins Co.$295
TexasAllstate F&C$333
UtahGEICO General$118
UtahGEICO Cas$131
UtahAllied P&C$160
UtahMid-Century Ins Co$192
UtahProgressive Classic$212
UtahAllstate F&C$220
UtahState Farm Mutual Auto$320
VirginiaGEICO General$92
VirginiaNationwide P&C$104
VirginiaState Farm Mutual Auto$130
VirginiaProgressive Gulf Ins$136
VirginiaAllstate P&C$202
VermontGEICO General$94
VermontNationwide Mutual$115
VermontProgressive Direct$133
VermontAllstate F&C$177
VermontState Farm Mutual Auto$195
VermontProgressive Northern$320
WashingtonNICOA$131
WashingtonProgressive Direct$148
WashingtonGEICO General$159
WashingtonState Farm Mutual Auto$169
WashingtonAllstate F&C$210
WashingtonFarmers Ins Co of WA$243
WisconsinGEICO Cas$64
WisconsinGEICO General$94
WisconsinState Farm Mutual Auto$128
WisconsinProgressive Universal$145
WisconsinMid-Century Ins Co$159
WisconsinArtisan and Truckers Casualty$176
WisconsinAllstate P&C$201
WisconsinAllied AMCO PPA$254
West VirginiaGEICO General$135
West VirginiaNICOA$153
West VirginiaState Farm Mutual Auto$160
West VirginiaNationwide Mutual$185
West VirginiaProgressive Max$204
West VirginiaAllstate P&C$246
WyomingState Farm Mutual Auto$144
WyomingGEICO General$158
WyomingMid-Century Ins Co$169
WyomingAllstate F&C$255

Also keep in mind that a good credit score alone will not guarantee you a low rate on your car insurance.

“Drivers with good credit may get lower rates, but their driving record is not ignored,” McChristian says.

To get the lowest rates, you need to avoid accidents and violations. Other tips for lowering your rates include:

  • Raising your deductible
  • Dropping collision and comprehensive coverage on older vehicles
  • Bundling your auto, homeowners and other types of insurance with one company
  • Consider a usage-based policy, such as SnapShot from Progressive or DriveWise from Allstate
  • Asking for discounts, such as paperless, good driver, good student, low mileage

Tips on improving your credit score

Of course, it always makes sense to maintain the highest credit score possible.

“Maintaining a good credit history pays off in many ways, including helping to lower your insurance costs,” McChristian says.

For example, people with good credit typically get the best rates when applying for a home mortgage or a car loan. For those reasons and more, maintaining a good credit score is crucial. A FICO score of 670 to 739, out of 850, is considered “good” credit.

“Think about protecting your credit rating in the same way you’d protect other valuables,” McChristian says.

Among other things, that means:

  • Paying bills on time every time
  • Thinking twice before opening new lines of credit
  • Keeping a low balance on your credit cards, under 30 percent of your limit is recommended, for example $300 for a $1,000 credit limit
  • Use your tax refund, if you get one, to pay down debt
  • Consider using a secured credit card, which requires a refundable security deposit in exchange for a line of credit, to build a strong credit history

You should also review your credit report for accuracy. You can request free copies of your credit reports from the three national credit reporting agencies through AnnualCreditReport.com,the only authorized website for free credit reports. Follow directions from the agencies to fix any errors. Be aware that credit scores are not included in your reports. You have to pay a fee to the credit reporting agencies to obtain your credit score. The Consumer Financial Protection Bureau advises you check with your credit card company first, as some will share your credit score with you for free or even note it on your monthly statement.

If your credit report is not in the best shape, don’t despair. Handling your finances responsibly should help you eventually turn things around.

“Over time, insurance scores can be improved,” O’Brien says.

-with reporting by: Chris Kissell

 

Methodology:

CarInsurance.com  commissioned Quadrant Information Services to field rates from 10 ZIP codes in each state from up to six major insurers, for a driver with good credit and a driver with poor credit, for full coverage. National average is based on states where credit is used in pricing policies.

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