Best car insurance for bad credit

A low credit score can increase your insurance rates, but Root has the lowest average rates for drivers with bad credit at $946 per year, followed by Concord Group at $1,231 per year.

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By

Rachael Brennan

Rachael Brennan

Property and Casualty Insurance Expert

Rachael Brennan is a senior insurance editor at Policygenius, specializing in auto insurance. She worked for 21st Century Insurance, BlueCross BlueShield Massachusetts, and HealthPass New York. She also spent two years working as a content expert for dozens of auto insurance websites through 360Quote LLC.

Published October 22, 2021|4 min read

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A low credit score can impact your finances in many ways. It can be harder to get a loan, cost you more in interest over time, and you may have to pay large deposits for utilities like electricity or the internet. A low credit score can also impact your car insurance rates, increasing your costs by hundreds of dollars a year.

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One way to find cheap car insurance even if you have bad credit is to compare quotes from multiple providers to make sure you are getting the lowest possible rate. Policygenius can help you see coverage options from top carriers so you can choose the best coverage at the best rate.

Key Takeaways

  • The overall cheapest company for drivers with bad credit was Root, at an average of $946 a year for coverage

  • There are several states that don’t allow insurance companies to use your credit rating to determine your rates, including California, Hawaii, Massachusetts, and Michigan

  • While insurance companies all use the same factors to set rates, each company decides how much weight to give your credit score, which means rates for an identical policy could vary wildly from company to company

  • Insurance companies set rates based on statistical groups, which is why something that seems arbitrary, like your credit score, can impact your rates

The cheapest car insurance companies by credit rating

One of the easiest and most effective ways to lower your insurance rates is to compare quotes from multiple companies, even if your insurance rates are high because your credit score is low. Insurance companies break down credit rates into several levels, including:

  • Excellent: 823+

  • Very good: 795-822

  • Good: 769-794

  • Fair: 710-740

  • Poor: 524-577

Many companies have other credit levels in their rating system, but these are the five most common groups when rating by credit.

Cheapest car insurance companies for drivers with bad credit

Drivers have dozens of options when it comes to choosing a car insurance company, but the chart below shows the five cheapest companies for drivers with low credit scores.

CompanyCost
Root$946
Concord Group$1,231
North Carolina Farm Bureau$1,354
Integrity Insurance$1,386
FAIA$1,564

Cheapest car insurance companies for drivers with fair credit

Raising your credit score from poor to fair can save you hundreds of dollars each year on your car insurance. Below are the five cheapest companies for drivers with fair credit scores.

CompanyCost
Root$783
Concord Group$942
North Carolina Farm Bureau$943
FAIA$1,008
American National$1,063

Cheapest car insurance companies for drivers with good credit

Maintaining a good credit score is an excellent way to keep your insurance costs low. Below are the five cheapest companies for drivers with good credit scores. 

CompanyCost
Root$707
American National$747
FAIA$800
Concord Group$839
North Carolina Farm Bureau$844

Cheapest car insurance companies for drivers with very good credit

Drivers with very good credit are offered lower rates on their car insurance than drivers with good, fair, or poor credit ratings. The chart below shows the five cheapest companies for drivers with very good credit scores.

CompanyCost
American National$633
Root$664
FAIA$716
Concord Group$795
North Carolina Farm Bureau$799

Cheapest car insurance companies for drivers with excellent credit

Drivers who maintain an excellent credit rating are given much lower rates than drivers with poor credit, sometimes saving $1,000 a year or more on their car insurance. The chart below shows the five cheapest companies for drivers with excellent credit scores.

CompanyCost
American National$538
Root$626
FAIA$639
Texas Farm Bureau$648
North Carolina Farm Bureau$733

Is car insurance more expensive if you have bad credit?

There are several states that don’t allow insurance companies to use your credit rating to determine your rates, including:

  • California

  • Hawaii

  • Massachusetts

  • Michigan

For residents in these states, your credit rate and FICO score won’t impact your insurance rates. People living in the other 46 states or Washington D.C. can expect their credit rating to impact how much they pay for insurance.

In states where your credit rating has an effect on your insurance premiums, a lower credit score will cause your rates to increase. How much of an increase (or, if your credit score improves, a decrease) you’ll see depends on your insurance company.

While insurance companies all use the same factors to set rates, each company decides how much weight to give each factor, which means rates for an identical policy could vary wildly from company-to-company. This means that drivers with low credit scores could still save money on car insurance by comparing quotes from multiple companies.

Ways to save on car insurance with bad credit

There are multiple ways to save money on your car insurance, including:

  • Take advantage of discounts: Most insurance companies offer a variety of discounts, including good student discounts, safe driver discounts, and bundling discounts, to name a few.

  • Pay your premium in full: Many companies add a fee to your insurance premium if you pay it in multiple installments. Making one payment at the beginning of your plan year can save you money on fees.

  • Keep your driving record clean: Avoiding accidents and moving violations is the easiest, most effective way to keep your insurance rates as low as possible. 

  • Choose your car carefully: Some cars are more expensive to insure than others. Better yet, an older vehicle that you can afford to replace out-of-pocket doesn’t necessarily need comprehensive or collision coverage. This means choosing to drive an older, more affordable car can potentially save you hundreds of dollars a year on your car insurance.

  • Improve your credit rating: Bringing up your credit score can lower your insurance rates. For example, a fair credit rating is between 710 and 740, so if you currently have a credit rating of 739 and you raise your credit rating by only two points you will be bumped into the next category, which could save you hundreds of dollars each year on your insurance rates.

Why is insurance more expensive for drivers with bad credit?

Insurance companies set rates based on statistical groups, which is why something that seems arbitrary, like your gender or your ZIP code, can impact your rates — based on years of detailed research, the insurance companies can see that people of a specific group file more claims than people in another group. Your credit score is simply another statistical grouping your insurance company uses when determining rates.

According to the insurance companies, people with higher credit scores file fewer claims and are less likely to commit insurance fraud, such as purposely destroying a car to get the insurance money, which is why a higher credit score earns you a lower insurance rate. 

Additionally, a higher credit score generally corresponds with a higher income, which means insurance companies believe that people with higher credit scores are more likely to be able to pay their premiums and more likely to pay for small damages out-of-pocket instead of filing a claim.

Drivers with lower credit scores can expect to pay more for insurance in most states because they are considered a higher risk.

How to improve your credit score

There are several ways to improve your credit score, including:

  1. Review your credit reports: You are entitled to a free copy of your credit report every year. In fact, as long as the COVID pandemic is ongoing, the three credit bureaus are offering a free copy of your credit report every week. Taking advantage of that to make sure everything on your credit report is correct and disputing any errors is the first step in improving your credit score.

  2. Set up automatic bill payments: Whether or not you pay your bills on time makes up about 35% of your credit report. If you’ve had issues with paying your bills on time, setting up automatic payments is an excellent way to get your credit report back on track.

  3. Don’t apply for new credit: Hard inquiries on your credit report, which include things like applications for new credit cards, mortgages, or an auto loan, can lower your credit score. If you are trying to improve your credit score, one of the best things to do is avoid applying for credit cards or loans. Don’t worry—applying for car insurance won’t affect your credit score.

  4. Take advantage of a good payment history: There are several programs, like Experian Boost, Ultra FICO, and Rent Track, that allow you to have rent payments or other recurring payments applied to your credit report so you can have those positive financial payments reflected on your credit score. 

Frequently Asked Questions

Are there insurance companies that do not use credit scores?

There are a few insurance companies that don’t use credit scores, but they tend to be small, local companies that only operate in a single state. You can work with our experts at Policygenius to get quotes from any carriers that offer coverage in your state, including companies that don’t rate based on credit score.

Does insurance impact your credit score?

No, getting an insurance quote does not impact your credit score. Insurance companies use a soft inquiry when they check your credit, which means it shows up on your credit record but it does not impact your credit score.

Can you be refused or denied insurance because of your credit score?

Yes, insurance companies can deny you car insurance if your credit score is too low. However, there are several states that do not allow insurance companies to deny you insurance because of your credit rating, including California, Hawaii, Maryland, Massachusetts, Michigan, Oregon, and Utah.

Methodology

Policygenius has analyzed car insurance rates provided by Quadrant Information Services for every ZIP code in all 50 states plus Washington, D.C. For full coverage policies, the following coverage limits were used:

  • Bodily injury liability: 50/100

  • Property damage liability: $50,000

  • Uninsured/underinsured motorist: 50/100

  • Comprehensive: $500 deductible

  • Collision: $500 deductible

In some cases, additional coverages were added where required by state or insurer.

Rates for overall average rate, rates by ZIP code, and cheapest companies determined using averages for single drivers ages 30, 35, and 45. Our sample vehicle was a 2017 Toyota Camry LE driven 10,000 miles/year.

Rates for driving violations and “Poor” credit determined using average rates for a single male 30-year-old driver with a credit score under 578.

Some carriers may be represented by affiliates or subsidiaries. Rates provided are a sample of costs. Your actual quotes may differ.

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