Car Insurance With Bad Credit: Costs and How to Save
In most US states, bad credit can make car insurance significantly more expensive, because insurers use a credit-based insurance score as one of many rating factors. Drivers with poor credit often pay much more than drivers with excellent credit and the same driving record. California, Hawaii, Massachusetts and Michigan ban or strictly limit the use of credit in auto insurance pricing. To get cheaper car insurance with bad credit, compare many insurers, try usage-based programs that price on driving habits, raise deductibles, use discounts and work on improving your credit over time.
Why Does Credit Affect Car Insurance?
Insurers say that, statistically, people with lower credit-based insurance scores file more claims and more expensive claims. Most states allow insurers to use these scores as one factor in pricing, along with your driving record, age, location, vehicle, coverage and claims history.
Credit-Based Insurance Score Vs. Credit Score
| Feature | Credit-Based Insurance Score | Lending Credit Score (FICO, VantageScore) |
|---|---|---|
| Purpose | Predicts insurance claims risk | Predicts likelihood of repaying debt |
| Source | Your credit report | Your credit report |
| Key factors | Payment history, outstanding debt, credit history length, new credit, credit mix | Similar factors, weighted differently |
| Not included | Income, race, religion, gender, marital status, address, age (by law) | Income, race, religion and other protected traits |
| Visible to you? | Usually not directly, but you can request information if it affects your rate | Yes, from many free sources |
States That Ban or Limit Credit in Car Insurance
- California: insurers cannot use credit to set auto rates.
- Hawaii: bans the use of credit in auto insurance underwriting and rating.
- Massachusetts: prohibits credit-based rating for auto insurance.
- Michigan: restricts insurers from using credit scores in setting auto premiums.
Other states have partial limits, such as restricting insurers from canceling or non-renewing solely based on credit, or requiring reconsideration after “extraordinary life circumstances” like medical debt or job loss. Rules change, so check your state insurance department.
How Much More Do Drivers With Bad Credit Pay?
Insurify’s April 2026 analysis of more than 197 million quoted rates found that drivers with poor credit (below 580) pay about 40% more for full coverage than drivers with excellent credit (720 and up):
| Credit tier | Average full-coverage premium | Difference |
|---|---|---|
| Excellent (720+) | $1,853 a year | — |
| Poor (below 580) | $2,602 a year | About $749 more (40%) |
The gap was widest in New York, where poor-credit drivers paid about 70% more ($3,914 versus $2,307), and smallest in California at about 20%. California bans credit-based auto pricing, so the remaining gap there reflects other factors that tend to track with credit, such as coverage choices, vehicles and driving history. For comparison, Experian puts the national full-coverage average at $2,912 a year as of September 2026; studies use different driver profiles, so compare the gap rather than the dollar figures across sources.
Because each insurer weighs credit differently, the gap between companies can be large, which is why comparison shopping matters so much. The same survey found that 69% of drivers with scores below 650 believed they already had a good deal, so many are likely overpaying without knowing it.
How to Get Cheaper Car Insurance With Bad Credit
- Compare at least five insurers: some companies weigh credit less heavily than others.
- Try usage-based insurance: telematics programs from major insurers track braking, speed, mileage and phone use, and can reward safe drivers regardless of credit.
- Consider pay-per-mile insurance if you drive little.
- Raise your deductibles on collision and comprehensive to lower the premium, as long as you could afford the deductible.
- Drop collision and comprehensive on an older car worth relatively little.
- Stack discounts: bundling, multi-car, good student, defensive driving, paperless, autopay and paid-in-full.
- Keep a clean driving record: tickets and accidents add to the cost.
- Choose a car that is cheaper to insure.
- Ask for a re-rate after your credit improves; many insurers re-check at renewal or on request.
- Look at state-run or non-standard insurers if you are having trouble getting coverage.
When you find a better price, our guide on how to switch car insurance explains how to change without a gap.
How to Improve Your Credit-Based Insurance Score
- Pay every bill on time; payment history is the biggest factor
- Lower credit card balances relative to limits
- Avoid opening many new accounts at once
- Keep older accounts open to lengthen your credit history
- Check your credit reports for errors and dispute mistakes
- Set up autopay to avoid missed payments
Improvements can take months to show up. Ask your insurer to re-check your score at renewal.
Can an Insurer Deny Coverage Because of Bad Credit?
In states that allow credit-based pricing, poor credit can lead to higher rates or placement in a higher-risk tier, and some insurers may decline to offer a policy. Under the Fair Credit Reporting Act, if an insurer takes adverse action based on your credit, it must tell you and explain how to get a free copy of the report used.
Bad Credit, Car Loans and Insurance
Bad credit affects car ownership in two ways: higher loan interest and higher insurance premiums. If you are shopping for a car, budget for both. Our guides on buying a car with bad credit and leasing a car with bad credit cover the financing side, and our car affordability calculator helps you set a realistic budget including insurance.
Not insurance or financial advice: Rules on credit-based insurance scores vary by state and insurer. Compare official quotes and ask each insurer how credit affects your price.
Related guides: How to switch car insurance · Buy a car with bad credit · Car affordability calculator
Bad Credit Car Insurance FAQs
Compare many insurers, try usage-based or pay-per-mile programs, raise deductibles, use every discount you qualify for and keep a clean driving record.
Some insurers may decline or place you in a higher-risk tier. If an insurer takes adverse action based on credit, it must notify you under federal law.
Often yes. Ask your insurer to re-rate your policy at renewal after your credit improves.
About 40% more for full coverage on average, according to Insurify’s 2026 analysis: roughly $2,602 a year with poor credit versus $1,853 with excellent credit. The gap varies widely by state and insurer.
