Key Takeaway: You can get car insurance with bad credit in every state, but in most states, an insurer can use your credit history to help set your premium. Having bad credit usually increases the amount you pay, not whether you can buy coverage.
You can get car insurance with bad credit, but you may pay more. Most insurers use a credit-based insurance score to help set your premium, and a lower score usually means a higher premium. Average annual premiums for drivers with poor credit were more than double those for drivers with excellent credit assuming they have the minimum coverage their state requires, according to a January 2025 report from the U.S. Treasury Department’s Federal Insurance Office.
Different states have different rules for how your insurance score can be used. California, Hawaii and Massachusetts ban these credit-based scores altogether, and Michigan bars the use of your credit score itself. If your credit score is the reason your premium increased, the insurer must tell you, and in some states, you can ask for a new quote based on your current credit.
If your credit history is increasing your premium, your driving record may be able to lower it. With usage-based insurance, an insurer looks at how safely or how much you drive to help set your price, so safe drivers can qualify for a lower premium. Credit Karma’s drive score is a free way to find out: The Credit Karma app tracks your driving in the background and lets you know if you qualify for a personalized discount, without affecting the rates you pay now.
- What is a credit-based insurance score?
- How much more do you pay for car insurance with bad credit?
- Which states limit the use of credit in car insurance?
- What can you do if bad credit raised your car insurance rate?
- How can you lower your car insurance with bad credit?
- What are the best insurers for bad credit?
- FAQs about bad credit auto insurance
What is a credit-based insurance score?
A credit-based insurance score is a number that car insurance companies use to predict how likely you are to file a claim. It isn’t the same as your credit score, which predicts how likely you are to repay what you borrow.
FICO introduced auto insurance scores in the early 1990s, and the National Association of Insurance Commissioners (NAIC) says about 95% of insurance providers use them in states where the practice is allowed.
How are insurance scores calculated?
Each company that builds auto insurance scores uses its own formula, so there’s no single scale to check yours against. FICO and LexisNexis Risk Solutions both sell these scores to insurers. Every version is built from your credit reports, and it can’t use your age, income or ZIP code.
FICO’s score weighs five areas:
- Payment history (40%)
- Outstanding debt (30%)
- Length of credit history (15%)
- Pursuit of new credit (10%)
- Credit mix (5%)
Your credit-based insurance score is still just one input. Insurers set your rate using it alongside your driving record, claims history, the car you drive and where you live.
How much more do you pay for car insurance with bad credit?
On a state-minimum policy, drivers with poor credit paid more than double what drivers with excellent credit paid, on average, according to a January 2025 report from the U.S. Treasury Department’s Federal Insurance Office. That same report reported the average state-minimum policy at $550 a year in 2022.
State-minimum coverage is the least liability insurance your state lets you drive with. Liability pays for other people’s injuries and property damage when you cause a crash, not for your own car. In Texas, for example, the minimum is $30,000 for injuries per person, $60,000 per accident and $25,000 for property damage. Add collision and comprehensive, which pay to repair or replace your own car, and you have what’s often called full coverage. No state requires those two, but if you still owe money on your car, your lender will.
The gap also depends on the coverage you buy, because each part of a policy is priced separately and credit doesn’t predict every kind of claim the same way. In a 2007 Federal Trade Commission study, drivers with the lowest credit-based insurance scores filed collision claims more than twice as often as drivers with the highest scores.
How much more you’ll actually pay depends on your insurer, your state and the coverage you choose. Insurers build their own scores with different formulas. Credit is one input alongside your driving record, claims history, location, coverage limits and deductibles, and eight states limit or ban the practice.
Can an insurer deny you car insurance because of bad credit?
In most states a car insurance company can’t use your credit as the only reason to deny, cancel or refuse to renew your policy. Every state has a last-resort program for drivers no company will cover.
Many states run an assigned risk plan (a state pool that spreads high-risk drivers across insurers). A few use a joint underwriting association or reinsurance facility, and Maryland runs a state fund. Expect to pay more there: risk pool premiums run substantially higher than a policy bought directly from a private company.
Which states limit the use of credit in car insurance?
Eight states limit how car insurers can use credit in determining insurance premiums. California, Hawaii and Massachusetts ban it outright when setting prices.
Michigan bars your credit score itself but not insurance scores built from it. Maryland, Oregon, Utah and Nevada restrict how it can be used. And in Utah, credit can earn you a discount but can’t raise your rate.
| State | Can insurers use credit to set auto rates? | What the law does |
|---|---|---|
| California | No | Proposition 103 limits auto rating to driving record, annual miles and years of driving experience, plus factors the commissioner adopts by regulation. Credit is not among them. |
| Hawaii | No | Bars any rating standard based on a credit bureau rating. |
| Massachusetts | No | Bars credit in rating and in the decision to issue or renew. |
| Michigan | Partly | Bars the 300-to-850 credit score from rating, and bars credit information or an insurance score from denial, cancellation or non-renewal. The rating ban does not extend to insurance scores, so insurers may still use a credit-derived insurance score to help set your premium. |
| Maryland | With limits | Allows credit on a new policy, capped at a 40% adjustment either way, but bars it from denial, cancellation, non-renewal or a renewal increase. |
| Oregon | With limits | Grants an annual re-rate on request, and bars that re-rate from raising your premium. |
| Utah | With limits | Bars credit from rating, eligibility, underwriting and renewal decisions, except to give a discount, never a surcharge. |
| Nevada | With limits | Bars renewal rates based on credit alone, and requires a re-rate on a current credit report at annual renewal if you ask. |
In the other states, insurers can use a credit-based insurance score to help set your rate, according to the NAIC.
What can you do if bad credit raised your car insurance rate?
If your rates and premium increase because of bad credit, the insurer has to send you an adverse action notice explaining that credit affected its decision. Under the Fair Credit Reporting Act, that notice must name the credit bureau behind the report and offer a free copy, which you have 60 days to request.
Here’s what you can ask for:
- Ask for your reason codes. You generally can’t pull your own insurance score. But your insurer can provide reason codes, which include up to four factors that affected the score.
- Ask for an extraordinary life circumstances exception. Many states follow the National Council of Insurance Legislators model act, which requires insurers to make an exception when certain events hurt your credit, including a serious illness or injury, a divorce, identity theft or an involuntary job loss. Ask in writing and include proof.
- Ask for a re-rate. A re-rate is a new price from your current insurer based on your current credit, in states that allow one, so check your state’s rules first. For example, Oregon lets you ask once a year to be re-rated as a new applicant, and the insurer has 30 days to do it. Oregon won’t let that re-rate raise your premium, but in other states a re-rate may cause your premium to go up, down or stay the same.
How can you lower your car insurance with bad credit?
You can lower your car insurance with bad credit by shopping around and comparing quotes, asking about discounts you may qualify for and considering usage-based insurance that provides pricing based on you on how you drive. Raising your deductible or cutting coverage you don’t need on an older car lowers the premium too, and a clean driving record and better credit help over time.
- Get quotes from several companies and ask about discounts. Insurers build their own credit-based insurance scores, and their formulas differ, so your price can vary from company to company. Compare at least three quotes.
- Ask about usage-based insurance. Usage-based insurance can base your monthly premium on how you drive. (It isn’t automatically cheaper.) Credit Karma’s drive score monitors your driving and tells you whether you qualify for a personalized discount, without affecting your existing rates.
- Give improved credit habits time to show up. In many states an insurer only has to refresh your credit information every 36 months, so a better score may not show up at your next renewal unless you ask for a re-rate.
- Review your deductible and coverage. Raising your deductible or dropping collision coverage on an older car lowers the premium without touching your credit. Just make sure you could cover the higher deductible if you ever need to file a claim.
What are the best insurers for bad credit?
The best car insurance for bad credit may give you more options by offering safe-driving programs, discounts or skipping a credit check entirely.
- State Farm: This auto insurer is a good option for high-risk drivers, with safe-driving programs and discounts that can help offset a higher rate.
- Nationwide: Nationwide offers usage-based insurance, with a SmartRide program that rewards safe driving with a discount.
- Geico: This insurer offers many discounts, with a wide range of savings that can help make up for a higher premium.
- Cure: This insurer doesn’t require a credit check. It also doesn’t use credit scores to set rates, though it serves only a few states.
FAQs about bad credit auto insurance
No, getting a car insurance quote doesn’t lower your credit scores. Insurers typically use a soft inquiry (a credit check lenders can’t see) when they quote you, and soft inquiries don’t affect your scores. That’s different from the hard inquiry you get when you apply for a loan.
No, a credit-based insurance score (sometimes called an auto insurance score) is not the same as a credit score. A credit-based insurance score predicts how likely you are to file a claim, while a credit score predicts how likely you are to repay borrowed money. Both draw on your credit reports but weigh it differently.
No, a better credit score won’t lower your rate automatically. Most auto policies last six months to a year, according to the Insurance Information Institute, but in many states an insurer only has to refresh your credit information every 36 months, so your renewal price may still reflect your old score. If you don’t want to wait, ask your insurer for a re-rate. In many states, the insurer has to reprice you on a current credit report or insurance score at your annual renewal if you ask.
A small number of car insurance companies that don’t check credit base your price on other factors, such as your driving record or how much and how safely you drive. In California, Hawaii and Massachusetts, state law bars every insurer from using credit to set your rate. Everywhere else, most insurers still use a credit-based insurance score where the law allows it, and a no-credit-check policy isn’t automatically cheaper, so compare quotes before you switch.
In most instances your car insurance doesn’t affect your credit. Insurers don’t report your premium payments to the credit bureaus, so your policy won’t show up on your credit reports and paying on time won’t build your credit. The credit checks that come with quotes and renewals are soft inquiries, which don’t affect your scores. The exception is an unpaid premium: if your insurer sends it to collections, the collection account can appear on your credit reports and lower your scores.