If your credit is less than excellent, no-credit-check auto insurance may be a good choice for you…but that’s not always the case.
While there are ways to get non-credit-based auto insurance, such a policy could end up costing you more than a standard insurance policy. The only way to know for sure which deal is best is to compare the no-credit-check insurance policy with a comparable standard policy.
Insurify can help you with car insurance quotes comparison, no matter your credit score, risk profile, or personal needs. Compare quotes from top-rated national and regional insurance companies, including those that won’t take your credit history into account, and find out where you can get the best deal and even score some savings.
Car insurance credit scores
Insurance companies first started checking credit scores in the 1990s. However, the credit score that insurance companies use isn’t quite the same as your standard FICO score.
Your insurance credit score is calculated based on the information in your credit report, just as your standard credit score is. However, the insurance credit score looks at different factors and may weigh those factors differently. For that reason, your insurance credit score may be significantly higher or lower than your standard credit score.
So before you start shopping for auto insurance companies that don’t check credit, check your insurance credit score and see if you have anything to worry about. You can check your auto insurance score for free through Credit Karma.
What to do if your auto insurance credit scores are low
First, the bad news: most auto insurance companies do check your credit before offering you a policy. The ones that don’t check your credit tend to inflate their insurance premiums to compensate for the “higher risk” of not knowing what your credit score is. However, you do have some options that can greatly reduce your auto insurance premiums if you have bad credit.
Bad credit auto insurance varies by state
If you have bad credit but live in California, Hawaii, or Massachusetts, you don’t need to worry about your credit score affecting your auto insurance premiums. That’s because those three states have passed laws forbidding insurance companies from checking their customers’ credit.
In the other 47 states, drivers with poor credit scores will pay more on average for auto insurance than drivers with the same driving history but excellent credit. However, just how much more drivers with poor credit pay varies from one state to the next. Consumer Reports has an interactive map that you can use to see how much your credit is likely to affect your auto insurance premiums based on where you live, and which is the best car insurance for bad credit in your state.
No-credit-check auto insurance companies
A few auto insurance companies are willing to extend coverage without a credit check, but in many cases, those policies are so expensive that they’re no better than getting a policy with a credit check from a standard insurance company, even if you do have poor credit. Still, if there’s an auto insurance company of this type in your state, it’s worth checking their rates and comparing them to your other options.
For example, drivers in Pennsylvania and New Jersey can check out insurance from Cure Auto Insurance, a company that sells car insurance without credit checks. Similarly, drivers in Texas can get a quote from Dillo through Empower Insurance.
When you’re getting quotes for car insurance, there’s an easy way to tell if the company isn’t going to check your credit: they won’t ask for your Social Security number. Insurers need this number to check your credit score, so if they don’t ask for it, you’re safe.
Bad credit auto insurance companies
Some companies offer a better rate for drivers with less-than-perfect credit. Overall, GEICO policies for drivers with poor credit tend to be somewhat cheaper than their competitors’ policies. However, this is just an average and can vary significantly from one state to another. For example, Consumer Reports found that GEICO was the best deal for drivers with poor credit in a number of states, but American Family was the best car insurance for bad credit in Oregon and Farmers was the best deal in Illinois.
A few companies specialize in what are called nonstandard auto insurance policies. These policies are designed for high-risk drivers, which is a category that insurance companies often extend to drivers with poor credit. Companies that focus on nonstandard policies include the following:
- Access (Arizona and Indiana)
- Alliance United (California)
- Dairyland (numerous states)
- Direct General (numerous states)
- GAINSCO (numerous states)
- Infinity (numerous states)
- SafeAuto (numerous states)
- United Auto (numerous states)
Usage-based auto insurance
Over the last few years, a number of insurance companies have adopted a new technology called telematics and used it to design usage-based auto insurance policies. A telematics device installed in your vehicle or an app on your smartphone will track how, where, and how much you drive; insurance companies can then use this information to come up with a rate quote based on your driving habits rather than on non-driving factors like bad credit.
Many of the bigger auto insurance companies, including Progressive, Allstate, and State Farm, now offer usage-based auto insurance policies in addition to their standard policies. These policies typically offer a small discount to start, but if you demonstrate safe driving habits, your insurance premiums will go down at renewal time.
Root Auto Insurance is a relatively new company that sells only usage-based insurance. Before you can sign up for a policy with Root, you’ll first load the company’s app onto your phone and then go for a test drive. Root will base your auto insurance quote on the information it collects during the test drive; while the company does take other factors into account, including your credit score, your test drive data is the single largest factor used to calculate your insurance premium. Auto insurance from Root is currently available in over 20 states and the company is in the process of expanding to several more.
Choosing your best option for bad credit auto insurance
As you can see, drivers with poor credit actually have several options for getting the best deal on auto insurance. Since auto insurance premiums are based on quite a few different factors, including which state you live in, there’s no one right answer for getting the best rates.
The best course of action for drivers with poor credit is the same as for drivers with excellent credit: compare rates from a number of different providers. If you have bad credit, you might get a quote from a no credit check auto insurance company, a bad credit auto insurance company, a few standard auto insurance companies, and perhaps a usage-based policy quote or two as well. The policy with the lowest premiums is the best deal.
When comparing policies, be sure that you’re comparing “apples to apples,” meaning that each policy has the same coverage limits and deductibles. It’s also important to confirm that those coverage limits are at least as high as the minimum requirements for your state.
Auto insurance quote comparison is possible with Insurify. Just look at how much drivers—even those with poor credit—can save after five minutes of comparison shopping. No matter your driving record or credit situation, you can score savings:
Here’s what Insurify brought up for the following driver profile: female; 40 years old; lives in Mesa, Arizona; has a job; has poor credit; drives a 1994 Subaru Legacy L; has a clean driving record; electing for standard protection.
The savings don’t just extend to those with a clean driving record. Here’s what Insurify brought up for the following driver profile: male; 28 years old; lives in Columbus, Ohio; has a job; has poor credit; drives a 2009 Chevrolet Aveo; has four incidents from the past seven years on record (including an at-fault accident, failure to stop, a reckless driving citation, and a speeding violation); electing for state minimum protection.
Even if you have accidents and violations on your record, a quick comparison shop will show you which insurance companies are willing to cover you for an affordable and fair price.
How to improve your credit and lower insurance premiums
Once you’ve identified the best bad credit auto insurance policy for you, you can start working on improving your credit score so that you’ll be able to save money on your next auto insurance policy. The most effective way to improve your credit score is simply to pay your bills on time; payment history is a major factor in calculating your credit score. Try to pay down your credit card balances, as a relatively low utilization score (meaning how much you owe on your credit cards compared to how high your credit limits are) will also help improve your insurance credit score. Finally, the longer your credit history is, the better.
Check your credit report at least once a year to make sure that there are no errors that could be negatively affecting your credit score. You can get a free credit report from all three credit bureaus every 12 months from the Annual Credit Report website. If you find an error, contact both the credit bureau and the company that posted the information to your credit report. For example, if one of your credit cards is reporting a late payment and you know you paid that bill on time, contact both that credit card company and the credit bureau(s) whose report shows the error. MyFICO has links to the credit report dispute websites for all three major credit bureaus.
Fixing your credit may take a long time, especially if you’re deep in debt or have major issues such as bankruptcy in your past. However, if you’re diligent about paying your accounts on time and generally show responsible behavior, your credit score will improve—and so will your auto insurance premiums.
Insurify can help you compare quotes from all of the companies mentioned here and more. See how much you can save, no matter your credit situation. Happy comparing!