Car Insurance for Bad Credit: How to Save in 2026

In most states, your credit score significantly affects your car insurance rate. Drivers with poor credit can pay 50–100% more than drivers with good credit for the exact same coverage. Here's how it works and what you can do about it.

How Credit Affects Car Insurance Rates

Insurers use a "credit-based insurance score" (different from your FICO score, but correlated with it) to help predict the likelihood of filing a claim. Studies show that drivers with lower credit scores file more claims — so insurers charge them more.

Credit Tier	Avg. Annual Premium	vs. Good Credit
Excellent (750+)	$1,500	Baseline
Good (650–749)	$1,800	+20%
Fair (550–649)	$2,400	+60%
Poor (below 550)	$3,000+	+100%

These are illustrative averages. Actual impact varies by state, insurer, and other factors.

States That Ban Credit Scoring

These states prohibit insurers from using credit scores to set auto insurance rates:

• California — banned under Proposition 103
• Hawaii — credit cannot be used for rates
• Massachusetts — credit cannot be used for rates
• Michigan — limited use (cannot be primary factor)
• Washington — credit cannot be used for rates

If you live in one of these states, your credit score doesn't affect your premium. In all other states, it can have a major impact.

Cheapest Insurers for Drivers with Bad Credit

Some insurers are more forgiving of credit issues than others:

Insurer	Credit Sensitivity	Avg. Rate (Poor Credit)
USAA (military)	Low	$1,800 – $2,400
GEICO	Medium	$2,200 – $3,000
State Farm	Medium	$2,300 – $3,200
Progressive	Medium-Low	$2,400 – $3,300
Root Insurance	Low (driving-based)	$2,000 – $2,800

Root Insurance is notable because it primarily uses driving behavior (tracked via phone app) rather than credit to set rates. Safe drivers with poor credit can get competitive rates.

How to Lower Your Rate with Bad Credit

1. Improve Your Credit Score

This is the most effective long-term strategy. Even moving from "poor" to "fair" can save $400–$800/year on insurance:

• Pay all bills on time (payment history is 35% of FICO)
• Reduce credit card balances (utilization is 30% of FICO)
• Don't close old credit accounts (length of history matters)
• Dispute errors on your credit report (free at AnnualCreditReport.com)
• Limit new credit applications (hard inquiries hurt temporarily)

2. Shop Around Aggressively

Credit sensitivity varies dramatically between insurers. Getting 5+ quotes is essential — the difference between the cheapest and most expensive insurer can be $1,500+/year for someone with bad credit.

3. Ask About Telematics

Programs like Progressive Snapshot, GEICO DriveEasy, and Root Insurance reward safe driving regardless of credit. If you're a safe driver, these programs can significantly offset the credit penalty.

4. Raise Your Deductible

Increasing your collision/comprehensive deductible from $500 to $1,000 lowers those portions of your premium by 15–30%.

5. Bundle Policies

Multi-policy discounts (auto + renters/homeowners) reduce your overall cost. Some insurers also offer loyalty discounts over time.

6. Pay in Full

Most insurers charge a monthly installment fee of 3–10%. Paying your 6-month or annual premium upfront avoids these fees and saves 5–15%.

7. Drop Unnecessary Coverage

If your car is worth less than $4,000 and you could afford to replace it, consider dropping collision and comprehensive. This can save $300–$800/year.

The Timeline: How Credit Improvement Affects Rates

Credit Change	Time to See Insurance Impact	Potential Savings
Poor → Fair	3–6 months	$400 – $800/year
Fair → Good	6–12 months	$300 – $600/year
Good → Excellent	12–24 months	$200 – $400/year

Important: Your insurer won't automatically lower your rate when your credit improves. You need to request a re-rating or shop for a new policy.

Frequently Asked Questions

Does checking my car insurance rate hurt my credit?

No. Insurance inquiries use a "soft" credit check that does not affect your score. You can get as many insurance quotes as you want without worry.

How long does bad credit affect my car insurance?

Credit-based insurance scores typically look at the past 5–7 years of credit history. As negative items age and your recent credit behavior improves, your score recovers. Most insurers re-check your credit at each policy renewal (every 6–12 months).

Can I get car insurance with no credit at all?

Yes. No credit history is treated differently than bad credit. Some insurers treat thin credit files as average risk. GEICO, State Farm, and Progressive tend to be more flexible for drivers with limited credit history.