The Cheapest Car Insurance for Drivers With Bad Credit Is Offered by Nationwide for $173 per Month or $1,807 per Year on Average for a Full-Coverage Policy
Discover if you are overpaying for car insurance below
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The Cheapest Car Insurance for Drivers With Bad Credit Is Offered by Nationwide for $173 per Month or $1,807 per Year on Average for a Full-Coverage Policy
Discover if you are overpaying for car insurance below
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According to our cost research, if you have poor credit, you could be paying as much as 137% more for car insurance depending on your state. But there are ways to save. We at the MarketWatch Guides team will cover how your credit affects your rate and how to shop for more affordable coverage from the best car insurance and cheapest car insurance providers.
Almost every state requires drivers to carry liability car insurance, and there are plenty of options for car insurance if you don’t have good credit. That said, the options might be expensive. Depending on your state, having a low credit score can increase your rate by as much as 137%.
According to our rate estimates, a 35-year-old driver with good credit can find car insurance for about $2,008 per year on average. A poor score increases it further to $3,829 annually. That’s nearly double the cost for poor credit drivers.
Of course, credit score is just one factor insurance companies consider, along with things like your driving history and age. Here’s how having a low credit score can influence rates for 25- and 35-year-old drivers differently.
25-Year-Old | 35-Year-Old | |
---|---|---|
Good Credit | $2,236 | $2,008 |
Poor Credit | $4,281 | $3,829 |
Some providers may be less expansive than others if you don’t have good credit. While you will probably pay more than you would if you had excellent credit, you don’t have to pay astronomically higher rates.
According to our rate estimates, the best companies with cheap auto insurance for those with lower credit scores include USAA, Geico, Nationwide and Progressive.
Bad Credit |
Average Monthly Cost |
Average Annual Cost |
USAA | $228 | $2,737 |
Geico | $216 | $2,592 |
Nationwide | $173 | $2,072 |
Progressive | $331 | $3,977 |
Erie Insurance | $227 | $3,319 |
American Family Insurance | $240 | $2,886 |
Travelers | $252 | $3,019 |
According to our estimates, drivers pay 46% to 137% more for having poor credit, depending on the state. Each state determines how its car insurance companies can set rates, including how they use a credit-based insurance score. This means having bad credit costs drivers more in some states than others.
Having bad credit in Georgia may raise your rates by about 63%, but having bad credit in Wisconsin can increase your rates by as much as 122%. The table below shows average rate estimates by state for a married 35-year-old driver with both good and poor credit, as well as the premium increase between the two averages.
State | Annual Cost |
Annual Cost |
Premium Increase |
Alabama | $1,175 | $3,231 | 82% |
Alaska | $1,685 | $2,692 | 60% |
Arizona | $2,008 | $6,321 | 125% |
Arkansas | $2,038 | $2,639 | 79% |
California | $2,519 | $2,519 | 0% |
Colorado | $2,173 | $4,006 | 84% |
Connecticut | $1,919 | $3,329 | 74% |
Delaware | $2,881 | $4,917 | 71% |
Florida | $3,244 | $4,796 | 47% |
Georgia | $1,973 | $3,198 | 62% |
Hawaii | $1,255 | $1,255 | 0% |
Idaho | $1,402 | $2,243 | 60% |
Illinois | $1,541 | $2,956 | 92% |
Indiana | $1,587 | $2,813 | 77% |
Iowa | $1,563 | $2,806 | 79% |
Kansas | $1,918 | $3,304 | 72% |
Kentucky | $2,522 | $5,090 | 102% |
Louisiana | $3,040 | $5,632 | 85% |
Maine | $1,238 | $2,414 | 95% |
Maryland | $1,833 | $3,123 | 70% |
Massachusetts | $2,632 | $2,632 | 0% |
Michigan | $3,643 | $9,877 | 171% |
Minnesota | $1,766 | $3,991 | 126% |
Mississippi | $1,658 | $3,093 | 87% |
Missouri | $2,104 | $3,935 | 87% |
Montana | $1,979 | $3,031 | 53% |
Nebraska | $1,871 | $3,983 | 113% |
Nevada | $2,788 | $4,328 | 55% |
New Hampshire | $1,362 | $2,712 | 99% |
New Jersey | $2,513 | $5,767 | 129% |
New Mexico | $1,943 | $2,943 | 51% |
New York | $2,088 | $4,904 | 135% |
North Carolina | $1,627 | $2,440 | 50% |
North Dakota | $1,916 | $3,597 | 88% |
Ohio | $1,599 | $2,944 | 84% |
Oklahoma | $2,278 | $3,408 | 50% |
Oregon | $1,925 | $3,215 | 67% |
Pennsylvania | $1,981 | $3,220 | 63% |
Rhode Island | $2,357 | $4,619 | 96% |
South Carolina | $1,845 | $3,421 | 85% |
South Dakota | $2,291 | $4,832 | 111% |
Tennessee | $1,524 | $2,853 | 87% |
Texas | $2,205 | $4,072 | 85% |
Utah | $1,928 | $3,594 | 86% |
Vermont | $1,199 | $2,201 | 84% |
Virginia | $1,781 | $3,463 | 94% |
Washington | $1,616 | $1,845 | 14% |
Washington D.C. | $1,812 | $3,238 | 79% |
West Virginia | $2,177 | $4,123 | 89% |
Wisconsin | $1,694 | $3,586 | 112% |
Wyoming | $1,702 | $2,767 | 63% |
Anytime you shop for car insurance, we recommend comparing multiple free quotes to find the best rates.
The No. 1 thing you can do to find cheaper rates is to shop around as much as possible. Ideally, take a couple of weeks before you need to renew your coverage and compare free quotes from three or more car insurance companies. You can also shop around each time your policy is up for renewal, even if you don’t plan on switching at that time.
Here are a few more ways that might help you save (but do your homework before you opt in):
Car insurance companies check credit scores when determining car insurance premiums. If you have poor credit, you need more for car insurance coverage. The sections below will discuss why insurers use credit scores when factoring policy costs and what to do if you’ve been turned down for coverage.
Let’s make a quick distinction. The credit score you’re familiar with, which you can check through any of the three major credit bureaus, is not exactly what car insurance companies look at. Car insurance companies use a credit-based insurance score to calculate risk.
The credit scoring company FICO developed the credit-based insurance scoring model in the 1990s, and then it and other organizations subjected the score to years of testing. According to FICO, credit-based insurance models “are based on the study of millions of policies and billions of dollars in claims payments from national and regional insurance companies representing all major geographic areas and distribution systems.”
According to the Insurance Information Institute (III), multiple studies have confirmed a high correlation between the credit-based insurance rating and the ratio of claims to premiums for a person.
In other words, the studies found that people with low credit scores cost insurance companies more in claims compared to people with higher scores. According to the III, today, 95% of both home and auto insurance companies use the model to predict risk.
So what’s the difference between credit scores and credit-based insurance scores?
Both models pull information from your credit report, but they weigh aspects slightly differently. Here’s how FICO’s credit-based insurance score and credit score compare, according to the National Association of Insurance Commissioners and FICO.
FICO Credit-Based Insurance Score Weight |
FICO Credit Score Weight |
|
Payment History | 40% | 35% |
Outstanding Debt | 30% | 30% |
Credit History Length | 15% | 15% |
New Credit | 10% | 10% |
Credit Mix | 5% | 10% |
You can see that FICO’s credit-based insurance score puts more weight on payment history and less on credit mix. Besides this, both scores also have different ranges. FICO’s standard credit scores range from 300 to 850, while its credit-based insurance score ranges from 100 to 900, according to Experian.
Credit-based insurance scores are not available to the public. However, both scores are similar in how they operate. Basically, if you have a low credit score, you also have a low credit-based insurance score.
Whether an insurer checks credit scores will depend on the state in which you live rather than the company itself.
Every state except California, Hawaii and Massachusetts allows companies to use credit-based insurance scores as a rate factor. If you live in one of those three states, the car insurance company is not allowed to use your credit data to set your rate.
However, if you aren’t among the lucky few, there’s no way to know for sure how much your credit score affects what you pay for car insurance. This is because companies don’t disclose the exact factors they used to calculate rates or how much they weigh each of those factors. This is why it’s important to compare car insurance quotes from multiple providers when you shop.
And don’t worry, checking multiple quotes won’t affect your credit score. Car insurance companies use soft inquiries when checking the credit scores of potential policyholders.
In some situations, you might find that car insurance companies are declining to cover you or charging you unreasonably high prices because of your poor credit rating. If this happens multiple times, you have the right to get car insurance through your state’s assigned risk pool.
States require car insurance companies to take on a portion of high-risk drivers, including people with very bad credit. Each state does this differently, but you can usually work through an agent at a company that has just turned you down to access the assigned risk pool.
Simply speak to an agent at an insurance company and tell them that you need coverage through the assigned risk pool. The agent will be able to either sell you their own high-risk insurance or connect you to another company that can provide you coverage.
If you have bad credit, you still have options for auto insurance. You can get bad credit car insurance from a number of providers. Typically, you’ll pay more for coverage, but you don’t have to settle for the first offer you come across. We recommend that you shop around and compare options to find the best auto insurance for you.
Below are frequently asked questions about car insurance for bad credit.
Your credit score plays an integral part in determining the rate you pay for car insurance. Better credit often gets you a better rate, and worse credit makes your coverage more expensive. Our research found that poor credit can double insurance rates.
Yes, you can be denied car insurance coverage if you have bad credit. However, most companies will likely give you a higher insurance premium if you have low credit scores.
Here are three main reasons you can be denied car insurance:
If you’ve had a major setback, it typically takes between one to two years to repair your credit. But that also depends on your individual situation.
Because consumers rely on us to provide objective and accurate information, we created a comprehensive rating system to formulate our rankings of the best car insurance companies. We collected data on dozens of auto insurance providers to grade the companies on a wide range of ranking factors. The end result was an overall rating for each provider, with the insurers that scored the most points topping the list.
Here are the factors our ratings take into account:
Our credentials:
*Data accurate at time of publication.
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