Car Insurance with Bad Credit

Bad credit raises car insurance rates. Drivers with poor credit history pay $165.39/mo more for coverage than drivers with good credit.

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Zaneta Wood, Ed.S. has over 15 years of experience in research and technical writing bringing a keen understanding of data analysis and information synthesis to reach a wide variety of audiences. She studied adult education and instructional technology at Appalachian State University as well as technical and professional communication at East Carolina University. Zaneta has prepared technical p...

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: May 12, 2020

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Here's what you need to know...

  • Insurance companies believe that drivers with low credit scores are irresponsible and therefore high risk clients
  • There are a several simple ways to improve one’s credit score
  • Make sure you keep track of your credit score and that it stays updated and current

Your options for car insurance are limited with bad credit. Finding an insurance company who will cover you will require planning and shopping around so you receive the benefits you need.

No matter what your credit score is, there is an insurer willing to cover you. You just might have to pay more for the privilege.

Get car insurance quotes by entering your ZIP code in the free tool now!

How do credit ratings impact your car insurance premium?

Most car insurance companies use credit ratings to determine the cost of premiums a car owner has to pay.

Insurance companies consider credit ratings because they believe that if you are not responsible in paying your bills on time, you will not be responsible in road safety as well and are more likely to file insurance claims.

Car insurance companies assume that there is a correlation between financial stability and risk.

Based on studies of credit ratings and insurance claims, those with lower credit scores are more likely to file claims.

This may be a little unfair to some groups of people who fall under this category but are responsible drivers and have never filed an insurance claim. However, statistics support that assumption.

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How do I improve my credit score?

Saving for car insurance is a great help for any car owner especially in today’s economy. If you are paying more on your car insurance because of your poor credit history, consider these points to improve your score and lower your premium charges.

  1. Be responsible in your bills. Make sure to pay your bills on or before due date. A delay of two payments will lead to a low credit score and may double the premium charges on your car insurance.
  2. Keep track of your credit applications. Several new accounts will affect your credit score. It is easier to maintain a few open accounts.
  3. If you do not have a credit history, it is the time to apply. Your lack of credit history will make you an unknown identity to car insurance companies. Your score is determined by how long you have had credit and kept your accounts open. Any negative records will greatly affect your score.
  4. Pay your debts owed from other companies. Always check your debts and try to keep your balances low.
  5. Get a copy of your credit status or report. Check all the information to see if it is updated and accurate. If any error occurs, seek out the creditors’ and the credit bureaus’ attention and have it repaired.

Improving your credit score will greatly help lower premiums. If you are planning to get new car insurance or you need a renewal, work on these factors to improve your score and pay lower charges.

What do I need to know about credit scores?

Keep track of your credit score. You can ask for a free copy from the credit bureaus under the Fair Credit Reporting Act.

Once your credit score is improved, you can ask your insurance company to make adjustments and reduce your premiums.

Or you may check online for car insurance companies that offer great benefits and lower premiums. There are even some insurance companies that do not check credit status.

Your FICO score  should be checked on a regular basis.

Before finalizing your choice of car insurance, research the pros and cons of several insurance companies. You can always check online for information and status of the company.

Before you sign a contract, read the details and terms and conditions to avoid future issues. If any information is unclear, don’t hesitate to ask questions.

Use the easy online tool to get car insurance quotes and compare to get the best policy at the best rate!


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