Having bad credit can make everyday expenses more challenging—including car insurance. In 2025, most insurers still use credit-based insurance scores to help determine rates, and unfortunately, drivers with poor credit often pay significantly more than those with good credit. While this may seem unfair, insurers link credit history with the likelihood of filing claims, which impacts your premium.
The good news? Not all insurance companies treat lousy credit the same way. Some carriers are more lenient and focus more heavily on your driving record, vehicle type, and location. Others offer usage-based insurance programs that reward safe driving rather than penalizing financial history. Companies like GEICO, Progressive, The General, and usage-based insurers such as Root or Metromile often provide better options for those with lower credit scores.
Understanding the Impact of Bad Credit on Car Insurance
Your credit score plays a significant role in how car insurance companies determine your premium. Many insurers believe that people with lower credit scores are statistically more likely to file claims. As a result, if you have bad credit, you may face higher insurance premiums even if you have a clean driving record.
While some states limit or restrict the use of credit scores in determining rates, many others allow it, which can make affordable car insurance hard to find for those with poor credit.
Why Credit Scores Affect Insurance Rates
Insurers use a version of your credit score, called a credit-based insurance score, to assess risk. This score is based on similar factors used in regular credit scoring—like payment history, debt levels, credit age, and inquiries—but it’s tailored to predict the likelihood of a future claim.
Studies have shown that lower scores are correlated with higher claims frequency, prompting insurers to charge more to those deemed riskier. While it may seem unfair, this method remains common in most states except where it’s prohibited, like in California, Hawaii, and Massachusetts.
What Drivers with Bad Credit Should Look For in an Insurance Provider
When shopping for car insurance with bad credit, it’s essential to look beyond just the monthly premium. Drivers should consider:
- Flexible payment options: Monthly installments with no added fees.
- No credit check policies: Some companies offer coverage without considering credit history.
- Discounts availability: Safe driver, bundling, low-mileage, and defensive driving discounts can offset higher premiums.
- Customer service quality: A supportive insurer can help with claims and billing issues.
- Financial strength: Choose companies with a good reputation for paying claims promptly.
Top Car Insurance Companies for Drivers with Bad Credit
While your rate will likely be higher due to poor credit, some insurance companies are more forgiving and offer better options:
- Geico – Known for offering relatively lower rate increases for those with bad credit and excellent digital tools.
- Progressive – Provides customized pricing and extensive discount programs to offset high premiums.
- Nationwide – Offers good coverage choices and may penalize bad credit less severely than competitors.
- State Farm – With a strong agent network, it offers helpful advice and potential discounts for driving safely.
- Root Insurance – A usage-based insurer that bases premiums more on driving behavior than credit score.
- Dairyland – A strong option for high-risk drivers, including those with poor credit or past driving issues.
Tips to Lower Car Insurance Costs with Bad Credit
Even if your credit is less than ideal, there are ways to reduce your car insurance premiums:
- Shop around: Get quotes from multiple providers to compare options.
- Increase your deductible: Opting for a higher out-of-pocket expense can reduce your monthly rate.
- Utilize discounts: Take advantage of available discounts such as safe driving, multi-policy, or anti-theft devices.
- Limit your coverage: Consider dropping comprehensive or collision coverage on older vehicles.
- Improve your credit: Over time, paying bills on time and reducing debt can help lower your rates.
States Where Credit Score Doesn’t Impact Rates
Not every state allows insurers to use credit scores when calculating auto insurance premiums. As of 2025, California, Massachusetts, Michigan, and Hawaii prohibit the use of credit information in car insurance decisions.
If you live in these states, your credit score won’t influence your car insurance rate. If you’re considering relocating or already residing in one of these areas, you may benefit from lower premiums even with poor credit.
How to Improve Your Insurance Eligibility Over Time
Improving your eligibility for better car insurance rates involves both credit and driving improvements. Start by monitoring your credit report regularly and resolving any errors. Pay your bills on time, reduce your debt, and avoid unnecessary credit inquiries.
On the driving side, maintaining a clean record, avoiding claims, and taking defensive driving courses can make you a more appealing customer. Some insurers also offer telematics-based programs that reward good driving habits with lower premiums.
Frequently Asked Questions
How does bad credit affect car insurance rates?
Insurers often view poor credit as a risk factor, leading to higher premiums.
Are there insurers that don’t consider credit scores?
Some insurers, like those in California, Hawaii, and Massachusetts, are prohibited from using credit scores in rate calculations.
Can improving my credit score lower my insurance rates?
Yes, as your credit improves, you may qualify for better rates upon policy renewal.
What discounts can offset lousy credit?
Safe driver, multi-policy, and usage-based program discounts can help reduce premiums.
Is it legal for insurers to use credit scores?
In most states, yes, but regulations vary; some states restrict or prohibit this practice.
How can I find the best rates with bad credit?
Use comparison tools like The Zebra or Insurify to shop around and find competitive rates.
Does a no-claims history help?
Yes, a clean driving record can positively influence your premium, even with bad credit.
Will paying in full reduce my premium?
Often, insurers offer discounts for paying the annual premium upfront.
Can I be denied coverage due to bad credit?
While rare, some insurers may decline coverage; however, many offer policies tailored for high-risk drivers.
Do all insurers weigh credit equally?
No, each insurer has its underwriting criteria; some may place less emphasis on credit scores.
Conclusion
While bad credit can lead to higher car insurance premiums, it’s not an insurmountable barrier. By leveraging comparison tools like The Zebra and Insurify, exploring discounts, and maintaining a clean driving record, you can find affordable coverage tailored to your needs. Remember, improving your credit over time can also lead to better insurance rates. Stay proactive, shop around, and consider insurers that offer programs focusing on driving behavior rather than credit history.
