Having bad credit can make it difficult to secure affordable car insurance. Many insurance companies use credit scores as a factor in determining premiums, arguing that individuals with lower credit scores are more likely to file claims. As a result, drivers with bad credit often face significantly higher rates.
But having a low credit score doesn’t mean you’re destined to pay sky-high premiums forever. There are strategies you can use to lower your car insurance costs, even with poor credit. From shopping around for quotes to taking advantage of discounts, this guide will walk you through actionable steps to secure more affordable car insurance despite your credit history.
How Credit Affects Car Insurance Rates
Many drivers are surprised to learn that their credit score plays a role in determining car insurance premiums. Insurers view credit-based insurance scores as an indicator of financial responsibility and risk. While this practice is controversial, it remains a standard approach for most insurance providers in the United States.
Insurance companies believe that people with higher credit scores are less likely to file claims, while those with lower scores are seen as higher-risk policyholders. As a result, individuals with bad credit often face higher rates, even if they have a clean driving record.
How Insurers Use Credit Scores
- Credit-based insurance score: This score is not the same as a traditional credit score but is derived from similar factors.
- Key factors used: Payment history, outstanding debt, credit utilization, and the length of credit history.
- States with restrictions: Some states, like California, Massachusetts, and Hawaii, prohibit insurers from using credit scores when setting premiums.
If you live in a state where credit can be used as a rating factor, it’s crucial to take proactive steps to lower your premiums.
How to Save Money on Car Insurance with Bad Credit
While it may seem like you’re stuck with high premiums, there are several ways to reduce car insurance costs even with a low credit score.
Shop Around for Quotes
Not all insurance companies weigh credit scores the same way. Some insurers place less emphasis on credit when calculating premiums. By comparing multiple quotes, you can identify which insurers offer the most affordable rates for drivers with bad credit.
How to Shop for Quotes
- Use online comparison tools like Insurify or The Zebra.
- Get quotes directly from major insurers like GEICO, Progressive, State Farm, and Allstate.
- Contact local or regional insurers, as they may have different pricing models.
By comparing multiple quotes, you may discover that certain companies specialize in offering lower rates for drivers with poor credit.
Look for Discounts and Savings Opportunities
Many insurance providers offer discounts that can reduce your premium, even if your credit score is low. By taking advantage of these discounts, you can offset the higher cost caused by a bad credit score.
Common Car Insurance Discounts
- Safe driver discount: If you maintain a clean driving record with no accidents or traffic violations, you may qualify for a lower premium.
- Good student discount: If you’re a student or have a student driver on your policy with good grades, you may qualify for a discount.
- Multi-policy discount: Bundle your auto insurance with renters, homeowners, or life insurance for a multi-policy discount.
- Multi-vehicle discount: Insuring more than one vehicle on the same policy can lead to significant savings.
- Usage-based insurance discount: Programs like GEICO’s DriveEasy or Progressive’s Snapshot reward drivers for safe driving habits.
If you’re unsure what discounts you qualify for, contact your insurance provider and ask about available savings opportunities.
Increase Your Deductible
Your deductible is the amount you pay out of pocket before your insurance kicks in. By choosing a higher deductible, you agree to pay more in the event of a claim, which reduces the insurance company’s financial risk. As a result, your premiums will be lower.
How It Works
- If you currently have a $500 deductible, consider increasing it to $1,000.
- Be sure you have enough savings to cover the deductible in case of an accident.
- Calculate how much you’ll save in premiums compared to the increased deductible cost.
Increasing your deductible is a smart way to lower monthly premiums, but it’s only advisable if you have enough cash saved to cover the higher out-of-pocket cost.
Opt for Liability-Only Coverage (If Appropriate)
If your vehicle is older or has a low market value, consider switching to liability-only coverage. Comprehensive and collision coverage is only required if you have an auto loan or lease.
When Liability-Only Makes Sense
- Your car is paid off.
- The cost of comprehensive and collision coverage is higher than the car’s value.
- You can afford to replace the car out of pocket if it’s totaled.
Switching to liability-only coverage is a simple way to reduce premiums. However, if you rely on your car for daily transportation and can’t afford to replace it, full coverage may still be the smarter option.
Improve Your Credit Score Over Time
While improving your credit score won’t provide instant savings, it’s a long-term strategy that can have a significant impact on your insurance premiums. As your credit score improves, you’ll qualify for better rates with many insurers.
Steps to Improve Your Credit Score
- Pay bills on time to establish a positive payment history.
- Reduce your credit utilization (keep balances below 30% of credit limits).
- Dispute errors on your credit report.
- Pay off high-interest debts to reduce your outstanding balances.
Once your credit score improves, ask your insurance provider to re-evaluate your policy to see if you qualify for a lower premium.
Consider Usage-Based Insurance (Telematics Programs)
Usage-based insurance (UBI) programs track your driving behavior using a mobile app or plug-in device. If you demonstrate safe driving habits, you may qualify for lower premiums — regardless of your credit score.
How Usage-Based Insurance Works
- Sign up for a usage-based program, like Progressive Snapshot or GEICO DriveEasy.
- Your driving habits, such as speed, braking, and mileage, are tracked via an app or device.
- If you demonstrate safe driving behavior, you may receive a discount on your premium.
Since these programs track your driving, they shift the focus from your credit score to your driving habits, giving you the opportunity to prove you’re a safe driver.
Switch to a Low-Cost Insurer
Some insurance providers cater specifically to high-risk drivers, including those with bad credit. Companies like The General and Acceptance Insurance specialize in offering affordable coverage to drivers with poor credit or a history of claims.
These companies may not require credit checks or may place less emphasis on credit scores. While the premiums may still be higher than average, they’re often more affordable than those from major insurers.
How to Get Car Insurance Without a Credit Check
In certain states, car insurance providers are prohibited from using credit scores to set premiums. If you live in one of these states, your credit score will not affect your insurance rate. States that prohibit or limit the use of credit scores in insurance decisions include:
- California
- Hawaii
- Massachusetts
- Michigan (limited usage)
If you live in one of these states, your premiums will be determined based on driving history, location, and other factors — but not your credit score.
If you don’t live in one of these states, you may still be able to avoid a credit check by shopping with insurers that offer “no credit check” policies. These insurers focus on driving history and claims experience rather than financial history.
Final Thoughts
Bad credit can make it more difficult to get affordable car insurance, but it’s not impossible. By comparing quotes, seeking discounts, increasing your deductible, and considering usage-based insurance, you can reduce your premiums. Over time, improving your credit score will lead to even more significant savings.
Take the time to shop around for insurance, ask about available discounts, and consider switching to liability-only coverage if it makes sense for your situation. By following these strategies, you can secure affordable car insurance quotes — even with bad credit.