Updated June 15, 2022
Are you worried that poor credit will raise your auto insurance rates? It’s true that insurance companies rely heavily on credit scores to determine your likelihood of filing an insurance claim. So having bad credit will require you to put in a little more effort on the journey to cheap car insurance.
Some companies don’t check your credit, but they might not offer full coverage, and their premiums aren’t a guaranteed win for every policyholder. Follow these tips to find great rates on auto insurance.
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Bad credit can raise your auto insurance rates, but there are ways to get around it.
A few auto insurance companies don’t check your credit—but they might not offer great coverage or premiums.
In California, Michigan, Massachusetts, and Hawaii, your credit score is off-limits to insurance companies.
No-Credit-Check Auto Insurance
Is it possible to get car insurance without a credit check?
In most states, car insurance companies are allowed to use credit score as a way to measure the risk of a policyholder. In a handful of states, this practice is outlawed.
Looking for car insurance companies that don’t check your credit score? There are a handful in every state, like Cure Auto Insurance, which provides no-credit-check auto insurance in New Jersey and Pennsylvania, and Dillo by Empower Insurance for Texas drivers. But be warned: premiums from companies like this are typically higher than you’d want.
You should look around for no-credit-check car insurance in your area, but bypassing a credit check is rarely the best way to get cheap auto insurance with a spotty credit history. For that, you’ll just want to look far and wide by getting car insurance quotes from as many companies as you can, including companies that check your credit score.
How to Tell If You Have Bad Credit
First, your FICO credit score is not the same as the credit score used by insurance companies to evaluate your credit. Different insurance companies do it differently—and the rules as to how they can use certain information also vary by state—but in general, providers use credit reports and other information to produce what’s called an insurance score.
With a poor insurance score, you’re likely to pay more on average than drivers with excellent credit, even if you have a great driving history. But while a bad credit rating certainly makes it harder to find cheap car insurance, there are plenty of ways to lower your insurance rates.
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Tips for Cheap Auto Insurance with Bad Credit
Car insurance for drivers with bad credit is widely available, so you’ll still be able to shop around for the policy and premium that work for you. Insurance companies are likely to offer higher rates to a driver with a low credit score, but it doesn’t have to devastate your budget if you use other strategies to bring your premiums down.
If your credit rating is low, insurance companies will take it as evidence that you are statistically more likely to file a claim than someone with great credit. Enrolling in a telematics program can help you provide more evidence to the insurance company that even if you don’t have a good credit score, you’ve got great driving habits and deserve low rates.
Lots of car insurance companies, especially the larger ones, have telematics programs. When you build a strong driving record and show off your driving habits (and perhaps bundle with homeowners or other policies), you can start to save money and let insurance companies know you’re unlikely to file claims.
High-Risk and Nonstandard Auto Insurance
Bad credit will affect car insurance rates because you get evaluated as a high-risk driver who is more statistically likely to file an insurance claim than a customer with fair credit. Luckily, some companies specialize in nonstandard auto insurance for high-risk drivers. So if you have bad credit that is resulting in super-high auto insurance quotes, you should try one of them.
Be aware that some nonstandard companies only sell minimum liability policies or otherwise have limited coverage options. You probably won’t get the best car insurance from a nonstandard-only insurance provider. But if you’re out of options, they can certainly help.
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States with Credit Score Regulations for Car Insurance Companies
Some states have stood up for drivers with poor credit and mandated that companies limit their use of credit scores in setting rates and refusing coverage. This is just one reason that car insurance premiums can vary so much in different locations, even from the same insurance provider. See if your state lets you catch a break from insurance pricing based on credit score.
|Auto Insurance Regulation||Relevant States|
|Companies can’t use your credit score to set rates or deny, renew, or cancel your auto insurance policy.||California, Massachusetts, Hawaii, Michigan|
|Companies can’t refuse or cancel your coverage based on credit, nor can they use your credit score to raise your rates upon renewal.||Maryland|
|Companies can’t deny you auto insurance based on your credit score and are limited in how they can use credit to set your rates.||Oregon, Utah|
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Tips for Raising Your Credit Score
You can’t raise your credit score in a day. But while you’re navigating the insurance challenges of a spotty credit history, you can start working to save money in the future by building your credit score.
Contact a credit bureau (Experian, TransUnion, or Equifax) to check your credit score with a free annual credit report. Your credit report will give you some insight as to why you might have poor credit and give you a full inventory of your credit cards and history.
If you don’t have a credit card, take one out and start paying it on time. Some people don’t have good credit because they haven’t spent the time it takes to build it. If you pay rent, you can use this to build credit with a handful of services.
Pay down the balance on your debts as you’re able—don’t make the minimum payments unless you have to. Your credit score will get better if you work to limit the number of late payments you’re making and pay down the balances that are the highest. It’s a myth that paying only the minimum on your credit cards will help—it won’t!
Seek financial help. Debt is stressful and confusing. You’ll have a better chance of getting through it and rehabilitating your credit score if you seek professional advice.
Cheap Car Insurance for All Credit Scores
Whatever your credit score, the best way to find the cheapest car insurance for you is to get a quote from as many insurance companies as you can. Plenty of insurance companies offer lower rates on car insurance to those with bad credit, whom other companies would charge higher premiums. Your best rate is waiting for you—all you have to do is find it.
Frequently Asked Questions
It’s simple: bad credit means higher premiums! It’s unfair, but it’s the reality.
Yes, there are a handful of insurance companies in a given area that offer no-credit-check auto insurance. But your search shouldn’t stop there: these companies frequently provide minimum insurance only or lack the customer service record of traditional insurance companies. So get insurance quotes from lots of companies before you sign a policy.
Many banks and credit card companies will provide you with FICO credit checks. Credit bureaus (Experian, TransUnion, and Equifax) also provide you with a free credit report each per year.
Bad credit makes it a little harder to find cheap car insurance, but it’s never impossible. You just need to find the insurance companies in your area that have discounts that match your profile and aren’t too harsh on a spotty credit history. Insurify is a great way to start comparing quotes and finding that perfect match.
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Data scientists at Insurify analyzed over 40 million auto insurance rates across the United States to compile the car insurance quotes, statistics, and data visualizations displayed on this page. The car insurance data includes coverage analysis and details on drivers' vehicles, driving records, and demographic information. With these insights, Insurify is able to offer drivers insight into how their car insurance premiums are priced by companies.