The best car insurance for people with bad credit in 2025

Your credit score impacts many areas of your life, not just when you want to borrow money. One example is car insurance. Many car insurance companies take credit history into account when evaluating an application and setting premiums. Drivers with poor credit are considered higher-risk applicants and tend to pay more for car insurance than those with good credit. 

If you have bad credit, don’t panic. You can still find affordable car insurance by shopping around, improving your credit score and finding the cheapest company in your state. According to our analysis of rate data, North Carolina Farm Bureau, Nationwide and Geico offer the cheapest premiums for poor-credit drivers. 

Read on to find out how your credit score impacts your car insurance premium and how to find the best car insurance companies with a poor credit score.

Does credit score affect car insurance?

Your credit score impacts your car insurance rates in most states. That said, most state regulators don’t allow insurance companies to base decisions solely on your credit. Instead, insurers evaluate your credit history as one of many factors when determining whether to give you an auto insurance policy and how much to charge. 

Your credit history helps to determine if you’re a possible liability, depending on the mistakes you may have made in the past. 

“If you have a bad credit score because you were late on a bunch of payments, or have large amounts of debt, the insurance company will consider you at much higher risk to make choices that will result in an accident or costly claims,” says Julie Bausch, managing editor of Car Talk.

In general, the better your credit score, the better the rate you can get. FICO scores and VantageScores both range between 300 and 850. Scores below 600 are usually considered bad or poor.

Cheapest auto insurance rates for bad credit by state and company

If you have bad credit, here are the car insurance companies that will likely offer you the cheapest rates in each state. 

Best car insurance companies for drivers with bad credit

Regional carrier North Carolina Farm Bureau offers the cheapest rates for drivers with bad credit. Among major car insurance companies, Nationwide, Geico, USAA, National General and Erie offer the lowest rates for drivers with poor credit. 

How much more do drivers pay with bad credit?

Our analysis shows drivers with poor credit pay an average of 80% more – or $1,462 per year – for a full coverage policy compared to drivers with good credit. Those with fair credit aren’t off the hook either, paying around $360 more annually than drivers with good credit.

Companies don’t simply use your credit score at face value, though. Insurance companies use proprietary algorithms to translate certain aspects of your credit profile into an insurance score. Having an excellent credit score doesn’t necessarily mean you have an excellent insurance score, says Kevin Hamill, owner of the Alliances Insurance Agency in Chester County, Pennsylvania.

Credit scoring was designed for lenders to evaluate a person’s ability to pay back debt, so insurance companies’ algorithms might focus more heavily on aspects of your credit profile that lenders consider low impact.

How to find the best car insurance with poor credit

If you have bad credit, it’s important to shop around and get quotes from multiple insurance companies to get the best price for your coverage needs. You can do this online or by getting quotes through insurance agents.

You should know the difference between types of agents if you go that route. Some insurance agents are considered “captive,” meaning that they represent only one insurance carrier. Other agents are “independent,” meaning they represent multiple carriers. 

“To secure the best policy at the best price, you should consult a few agents rather than one,” Hamill says.

Why bad credit auto insurance varies by state

Every state has its own laws, and some states ban insurance companies from using parts of your credit score as a factor in setting car insurance rates. The cost of auto insurance differs by state because the laws for minimum amounts of required insurance coverage and regional actuarial tables vary. 

“Weather conditions, population data, (and) the amount of accidents per year in a particular region will all affect the cost of car insurance,” Bausch says.

States that don’t allow insurers to use credit scores

There’s a handful of states that don’t allow insurance companies to factor in your credit score at all when setting rates:

• California
• Hawaii
• Massachusetts
• Michigan 
• New Jersey 

“If you live in one of these states, you are in luck,” Bausch says. “If not, then you should be prepared to shop around for the best rates and do your research.”

Additionally, insurance companies in Oregon, Maryland, and Utah are limited in how they can use your credit history. They can determine your rates for a new policy but can’t deny your application, cancel your policy, refuse to renew your policy or increase your insurance premiums when you renew because of your credit score. The exact rules depend on the state.

How to improve your credit score and get cheap car insurance

Here are steps to improve your credit score if your credit isn’t in great shape and you want the cheapest car insurance costs.

Fix credit report errors 

Your credit reports contain information that’s used to calculate your credit score. And these reports contain errors more often than you might think. 

About one-third of consumers found at least one error in their reports, according to a new Consumer Reports investigation. That can cause your score to be lower than it should be. 

To check your reports for errors, get a free copy from each major credit bureau — Equifax, Experian and TransUnion — at annualcreditreport.com. If you find a mistake, you can dispute it directly with the bureau reporting it.

Make all your payments on time

Your payment history makes up 35% of your credit score, making it the most important factor. Even one missed payment can cause it to take a big hit — especially if you already have a high score. To keep your credit score in good shape, make your payments in full and on time. 

Pay down debt

Another important credit score factor is the amounts owed, also known as your “credit utilization.” This measures how much debt you owe compared to the total amount of credit available to you. 

Revolving credit (such as credit cards) are weighted more heavily than installment loans (student loans, car loan, mortgage, etc.). Keeping your total outstanding debt as low as possible will improve your score.

Build up a thin file

If you’re new to using credit, you might have a thin credit file. This means you don’t have enough history to generate a credit score yet. Don’t fret; you can build credit without going into debt. 

You can open a secure credit card or a credit-builder loan. Both options require an upfront deposit (which you can get back) and are decent ways to grow your credit history and boost your score. 

Limit applications for new credit

When you apply for a credit card or loan, the lender pulls a copy of your credit reports. This is known as a hard credit inquiry.

Usually, credit inquiries have a minimal impact on your score. That is unless you rack up several within a short timeframe, which can be a red flag that you’re too reliant on credit to pay your obligations. 

Avoid hard inquiries whenever possible if you’re working on improving your credit.

Get car insurance quotes from multiple companies

It’s a good idea to get at least three car insurance quotes from different insurance companies. This allows you to ensure you’re not missing out on a better deal elsewhere. Just make sure when comparing policies you use the same coverage amounts to get an apples-to-apples comparison. 

Ask about discounts

Just because your credit score is poor doesn’t mean you don’t qualify for discounts under other categories. Most major car insurance companies will discount your premiums if you’ve gone claim-free for several years or bundle your car policy with another product, like home or renters insurance. 

Here are some other common car insurance discounts:

• Accident-free.
• Anti-lock brakes.
• Anti-theft systems.
• Good student.
• Loyalty.
• Paid-in-full.