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Best car insurance for bad credit

Updated Jan 03, 2024
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Having bad credit or limited credit history can negatively affect your finances in a number of ways. One that you may not expect is being charged a higher rate for car insurance. In most states, insurance providers can factor in your credit history when calculating your premiums. According to data from Quadrant Information Services, car insurance for drivers with bad credit costs an average of $3,479 per year for full coverage. This is nearly twice as much as a driver with excellent credit pays, on average. In this overview, Bankrate breaks down how drivers with bad credit may be able to find more affordable rates for the coverage they need.

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Best car insurance companies for drivers with bad credit

In states that use your credit history to inform your insurance score, drivers with poor and average credit generally pay more for auto insurance than those with good or excellent credit. Some auto insurers also choose to weigh your credit history as a risk factor more heavily than others, which is why some carriers may offer better rates for drivers with poor credit than others.

Statistically speaking, drivers with low credit are more likely to file claims, meaning that they are a greater insurable risk for an insurance company. As a result, many of the best auto insurance companies for drivers with bad credit are the same as those for high-risk drivers. Keep in mind that even if you have bad credit, there may be other factors, such as a good driving history or discount opportunities, that you could use to your advantage to offset the impact of poor credit history.

Based on Bankrate’s research, drivers with bad credit may want to consider getting a quote from Dairyland, Direct Auto, Progressive or State Farm.

Dairyland

Headquartered in Wisconsin, Dairyland specializes in insuring high-risk drivers. Dairyland is only available in 38 states, but the carrier offers non-standard auto policies with potential add-ons like gap insurance, rental reimbursement and special equipment coverage. Dairyland has a financial strength rating of A+ (Superior) from AM Best, indicating a strong historical ability to meet financial obligations, but the company is not rated by J.D. Power for customer or claims satisfaction, so potential customers may want to speak with existing policyholders about their experience.

Direct Auto

Direct Auto may be a solution for drivers with poor credit. In addition to providing basic car insurance coverage options, Direct Auto also offers optional accidental death coverage. This would pay $5,000 to your specified beneficiary if you pass away due to an accident in your car.  Direct Auto also offers flexible payment plans, which may help if you are having credit issues. The company offers some uncommon discounts, including potential savings for returning customers and for previously insured customers with a coverage lapse not exceeding 90 days. One drawback to Direct Auto, however, is its limited add-on coverage options.

Progressive

Progressive was named the 2024 Bankrate Award winner for Best Auto Insurance Company for High-Risk Drivers and could be a good option for those who prefer a national insurance carrier. The company is known for its strong digital tools, including the Name Your Price Tool, which may help shoppers narrow down exactly what they want in their policy and cut needless expenses. Progressive also offers a long list of potential discounts that may help offset elevated rates for those with poor credit. However, Progressive consistently ranked below average for overall customer satisfaction in the 2023 J.D. Power U.S. Auto Insurance Study, which may be an issue for shoppers who value service.

State Farm

State Farm has thousands of local agents across the country who may be able to work with you to find low rates, even if your credit history is subpar. Policyholders might also be able to save by enrolling in one of two available telematics programs (Drive Safe and Save or Steer Clear), completing a defensive driving course, bundling insurance products and more. Although State Farm scored highly for claims satisfaction by J.D. Power, a downfall could be the absence of key add-on coverage types like gap insurance.

Cheapest car insurance companies for drivers with bad credit 

Depending on the state you live in, most car insurance companies consider your credit history when pricing your policy. However, each company weighs credit a little differently. Experts recommend getting quotes to compare rates, coverage options, discount opportunities and policy features, but if your credit is low, shopping around may be even more important.

Based on our research, Geico, Nationwide, Mercury, Amica and Travelers are some of the cheapest providers for drivers with bad credit. In addition to low average rates, these cheap car insurance companies rank well for customer satisfaction with J.D. Power, have high financial strength ratings from AM Best and offer numerous potential discounts and coverage options.

Car insurance company Avg. annual full coverage premium with poor credit Difference from national avg. annual full coverage premium with poor credit
Geico $1,865 -46%
Nationwide $1,985 -42%
Mercury $2,127 -39%
Amica $2,216 -36%
Travelers $2,423 -30%

How your credit impacts your car insurance rates

Auto insurance companies generally assess customers' credit-based insurance scores when providing a quote or finalizing a policy. Drivers with lower credit are statistically more likely to file claims, which means they could cost the insurance company more money. To compensate for the added risk, most insurance companies in most states charge higher rates for drivers with lower credit. In general, the higher your credit rating, the lower your insurance premium.

Four states currently do not use credit as a rating factor for car insurance, though: California, Hawaii, Massachusetts and Michigan. Texas and Colorado have limits on how insurance companies can use credit, but do not outright restrict its use. Washington recently attempted to place a three-year ban on using credit as a rating factor for insurance, which would have gone into effect in March 2022.

However, in August 2022, the court ruled that the commissioner overstepped his authority when issuing a temporary ban on using credit as a rating factor. The court’s final decision was that credit can be used to rate auto insurance policies in Washington, and the commissioner has confirmed that he will not appeal the decision. Despite the state’s efforts, there continues to be no restrictions on insurance providers using credit when determining premiums.

Below, you can see how average rates vary across credit tiers. These rates reflect national averages, but your own rates may vary based on additional personal rating factors like your location, vehicle type, claims history and, in some states, your age and gender.

Credit level Average annual full coverage premium
Poor $3,479
Average $2,176
Good $2,014
Excellent $1,764

Auto insurance rates for bad credit by state

The cost of insurance for a driver with poor credit may vary greatly based on where you live. Unless you live in California, Hawaii, Massachusetts or Michigan, your credit history will likely impact your premium. In some states, drivers with poor credit can pay over twice the amount that drivers with good credit pay for the same coverage.

State Average annual full coverage premium with poor credit Average annual full coverage premium with excellent credit
Alabama $3,270 $1,614
Alaska $2,697 $1,771
Arizona $3,258 $1,584
Arkansas $3,849 $1,610
California* $2,291 $2,291
Colorado $3,535 $1,756
Connecticut $2,900 $1,261
Delaware $3,522 $1,773
Florida $6,378 $2,673
Georgia $3,330 $1,843
Hawaii* $1,275 $1,275
Idaho $1,868 $1,016
Illinois $2,874 $1,550
Indiana $2,095 $1,125
Iowa $2,343 $1,135
Kansas $3,124 $1,638
Kentucky $3,911 $1,807
Louisiana $5,532 $2,470
Maine $1,640 $842
Maryland $3,206 $1,700
Massachusetts* $1,262 $1,262
Michigan* $6,870 $2,073
Minnesota $3,287 $1,520
Mississippi $3,232 $1,544
Missouri $3,145 $1,637
Montana $3,002 $1,655
Nebraska $3,037 $1,376
Nevada $4,027 $2,480
New Hampshire $2,337 $1,021
New Jersey $3,211 $1,376
New Mexico $2,582 $1,410
New York $7,186 $2,581
North Carolina $1,813 $1,391
North Dakota $2,445 $1,089
Ohio $2,229 $1,065
Oklahoma $3,571 $1,748
Oregon $2,375 $1,241
Pennsylvania $2,915 $1,856
Rhode Island $3,085 $1,687
South Carolina $2,950 $1,251
South Dakota $3,288 $1,270
Tennessee $2,761 $1,231
Texas $3,304 $1,752
Utah $2,661 $1,277
Vermont $1,822 $949
Virginia $2,533 $1,195
Washington $1,468 $1,393
Washington, D.C. $3,337 $1,861
West Virginia $2,688 $1,348
Wisconsin $5,631 $1,076
Wyoming $2,583 $1,323

*These states do not allow the use of credit as a rating factor, so your credit history should not affect your car insurance rate.

What is no-credit-check auto insurance?

Most auto insurance companies assess credit history as part of their algorithm for determining rates for drivers (in states where it is allowed). However, some companies offer what is called no-credit-check auto insurance. These insurance companies do not use your credit history to generate your auto insurance rate.

When shopping around for a no-credit-check policy, you may want to find a few companies and compare them, as the premiums may be higher than those for standard car insurance policies. The higher cost of these no-check plans is the company’s way of creating a protective buffer around financial risk. Some customers may pay more than they might with a credit check, while others may pay less.

One example of a no-credit-check company is Root. Root Insurance bases driver approval and rates on a test drive period using a telematics device. The company claims that this method allows it to base rates solely on demonstrated driving habits and helps keep rates down for all policyholders by only extending coverage to drivers who demonstrate safe habits behind the wheel.

How to improve your credit score

One strategy for drivers looking to save with poor credit may be to improve your credit history. If you are trying to improve your credit, these strategies may help you bring your score up. Note that it may take time to see improvement after implementing these strategies.

  • Make payments on time. Making late payments, or failing to make payments at all, is typically one of the worst things you can do to your credit. Making timely payments may be one of the best ways to increase your score.
  • Never make less than the minimum payment. Making less than the minimum payment is typically not as bad as not paying at all, but it will still leave your account delinquent until the full payment is made.
  • Use credit and debt wisely. Be careful when you take out loans and credit cards. If the minimum payments will stretch your budget, it might be best to forgo the loan or card entirely.
  • Maintain a low credit utilization rate. The more of your total credit that you keep available, the less risky you may be to your lender. Using 30 percent or less of your available credit is considered optimal for growing and maintaining a good credit history.
  • Limit hard credit inquiries. Frequent hard credit inquiries can actually lower your credit score. Try to limit hard inquiries and always ask a potential lender or creditor if they will be running a “soft” or “hard” check before authorizing them to do so. If you are checking your credit history for your own knowledge, make sure to use a reputable company that only monitors with a soft inquiry.

Other ways to save on car insurance

Beyond improving your credit, there are other ways to save on car insurance. Some common ways to save include:

  • Taking advantage of discounts: Most car insurance companies offer at least a few discounts that might help you lower your premium. Bundling your auto and home, renters or condo insurance is one of the most common discounts available.
  • Increase your deductibles: If you have full coverage, you have a collision deductible and a comprehensive deductible. Increasing one or both will generally lower your premium, but you will need to pay more if you file a claim for vehicle damage.
  • Compare quotes: Because every insurance company has a different rating system, the price for the same coverage can vary between providers. Getting several quotes might help you find a lower rate.
  • Consider your coverage: Typically, skimping on coverage isn’t a good strategy to save money, as it can end up costing you more if you get into an accident. However, reviewing your policy and making sure you are only paying for coverage types you need may be helpful. You may be paying for coverage options that are no longer necessary for you. For instance, you may be able to save by removing coverage options like new car replacement or accident forgiveness if you are currently paying for those benefits. Speak with your insurance agent to determine what coverage types and levels are right for you.

Frequently asked questions

Methodology

Bankrate utilizes Quadrant Information Services to analyze 2023 rates for ZIP codes and carriers in all 50 states and Washington, D.C. Rates are weighted based on the population density in each geographic region. Quoted rates are based on a 40-year-old male and female driver with a clean driving record, good credit and the following full coverage limits:

  • $100,000 bodily injury liability per person
  • $300,000 bodily injury liability per accident
  • $50,000 property damage liability per accident
  • $100,000 uninsured motorist bodily injury per person
  • $300,000 uninsured motorist bodily injury per accident
  • $500 collision deductible
  • $500 comprehensive deductible

To determine minimum coverage limits, Bankrate used minimum coverage that meets each state’s requirements. Our base profile drivers own a 2021 Toyota Camry, commute five days a week and drive 12,000 miles annually. 

These are sample rates and should only be used for comparative purposes. 

Credit-based insurance scores: Rates were calculated based on the following insurance credit tiers assigned to our drivers: “poor, average, good (base) and excellent.” Insurance credit tiers factor in your official credit scores but are not dependent on that variable alone. Four states prohibit or limit the use of credit as a rating factor in determining auto insurance rates: California, Hawaii, Massachusetts and Michigan. 

Written by
Lizzie Nealon
Insurance Contributor

Lizzie Nealon is an insurance contributor for Bankrate and enjoys making home, auto and life insurance digestible for readers so they can prepare for the future.

Edited by Editor, Insurance