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Having bad credit can raise your car insurance premium significantly — but some insurers penalize poor credit less than others. Here are the best options if your credit score is below 580.
How Credit Affects Car Insurance Rates
In most states, car insurance companies use a credit-based insurance score to help set your premium. Studies show that drivers with lower credit scores file more claims on average. As a result, insurers charge more to offset that risk.
The impact is significant. Drivers with poor credit pay an average of 61% more than drivers with good credit. That is roughly $700 more per year on a $1,150 average premium.
States that ban credit scoring: California, Hawaii, Massachusetts, and Michigan do not allow insurers to use credit scores. If you live in one of these states, your credit will not affect your premium.
Best Car Insurance Companies for Bad Credit
1. Geico — Lowest Average Rates for Poor Credit
Geico charges less than most competitors for drivers with poor credit. While rates still go up with bad credit, the baseline is lower than average. Geico’s large scale allows it to spread risk across a wide pool of drivers.
2. State Farm — Smallest Credit Penalty
State Farm applies one of the smallest credit-based surcharges in the industry. The difference in premium between a driver with excellent credit and poor credit is smaller at State Farm than at most other major insurers.
3. Progressive — Best for High-Risk Drivers Overall
Progressive specializes in nonstandard and high-risk drivers. It accepts drivers with poor credit, recent accidents, and DUIs that other companies reject. Its Snapshot telematics program also lets safe drivers earn discounts that can partially offset the credit penalty.
4. USAA — Best for Military Families with Bad Credit
USAA also applies a relatively small credit surcharge and offers some of the lowest base rates available. If you are eligible, it is the best option regardless of credit.
How to Lower Your Premium with Bad Credit
- Shop at least three quotes. Credit penalties vary widely by insurer — shopping around can save hundreds per year.
- Raise your deductible. A higher deductible lowers your premium. Make sure you can cover the deductible in cash if you need to file a claim.
- Drop comprehensive and collision on older vehicles. If your car is worth less than $4,000–$5,000, these coverages may not be worth the premium.
- Ask about telematics programs. Programs like Progressive Snapshot or State Farm Drive Safe and Save reward safe driving habits regardless of credit.
- Work on your credit. As your score improves, ask your insurer to re-run your credit at renewal. The savings can be significant.
Bottom Line
Bad credit raises your car insurance premium, but the penalty varies significantly by insurer. Geico and State Farm tend to offer the most competitive rates for drivers with poor credit. Always compare at least three quotes and consider telematics programs to offset the credit surcharge.
Frequently Asked Questions
Can insurers use your credit score to set rates?
In most states, yes. Insurers use a credit-based insurance score (different from your FICO score) to predict claim likelihood. California, Hawaii, and Massachusetts ban this practice.
How much more does bad credit cost for car insurance?
Drivers with poor credit pay an average of 61% more for car insurance than drivers with good credit, according to industry data. That can add $500 to $1,500 per year to your premium.
Will improving my credit lower my insurance rate?
Yes. As your credit improves, ask your insurer to re-run your credit score for a new rate. Some insurers do this automatically at renewal.