Jessica Sautter is a Content Writer for CarInsuranceCompanies.com with a Bachelor’s Degree from Eastern Michigan University in Elementary Education with a Major in Reading and a Minor in Mathematics.

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Chris Harrigan has an economic degree from Limestone College and an MBA from Clemson University. He previously managed auto insurance claims for Enterprise Rent-A-Car. Currently, he is using his business and insurance expertise to provide insurance data analysis and visualizations to enhance the user experience.

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Reviewed by Chris Harrigan
Former Auto Insurance Claims Manager

UPDATED: Aug 30, 2021

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Key Takeaways

  • Car insurance companies use credit history to determine risk
  • Four states don’t allow car insurance companies to use credit history
  • Improving your credit score will help you obtain lower rates

Car insurance companies sometimes use credit history to determine risk, resulting in higher rates for bad credit. However, you can obtain lower rates by increasing your credit score and bundling discounts.

Keep reading to learn more about the best car insurance companies for bad credit and how to find affordable coverage.

Before looking at the best car insurance companies for bad credit, enter your ZIP code to find free auto insurance quotes in your area.

Which car insurance companies for bad credit offer the most affordable rates?

Finding the best cheap auto insurance companies for bad credit can be difficult. Customers with poor credit are determined to be riskier to insure than those with good credit. The following chart shows how your credit score impacts your rates based on the company and credit type.

Average Annual Rates from the Best Car Companies for Bad Credit by Company and Credit Score
CompanyPoor CreditFair CreditGood Credit
Allstate$2,254$1,604$1,351
Farmers$3,281$1,776$1,578
GEICO$1,681$1,212$1,047
MetLife$4,248$2,332$1,686
Nationwide$1,781$1,518$1,341
Progressive$2,475$1,792$1,381
State Farm$2,527$1,482$1,235
Travelers$2,490$1,721$1,525
USAA$1,460$936$883
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As you can see, the best car insurance rates for bad credit are higher than for those with good credit. USAA is the best company for customers with poor credit, and MetLife is the worst company for those with poor credit.

All but four states consider your credit history when determining your car insurance rates.

California, Hawaii, Massachusetts, and Washington don’t allow car insurance companies to use credit scores in their ratings, so you can find a car insurance no-credit-check plan in these states.

Michigan has the highest average car insurance quotes for those with bad credit at $720 per month. Drivers with low credit scores can expect to pay as much as $6,314 more per year for car insurance than those with exceptional credit.

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How can you save on car insurance rates for drivers with bad credit?

According to the Insurance Information Institute, car insurance companies offer various discounts that can help decrease rates. You usually won’t find a direct auto insurance no-credit-check plan, so bundling these discounts might be the best way to obtain affordable auto insurance rates.

The most common discounts that you can use include a good driver discount and adding safety mechanisms to your vehicle. If you’re in school, many companies also offer a good student discount.

Many insurance companies offer a discount to customers that make an annual one-time payment in advance. This payment method is valuable to the company because they don’t worry about customers missing payments.

In addition to these offered discounts, you can obtain lower rates by improving your credit rating. There are various ways in which you can do this, including:

  • Making payments on time
  • Never making less than the minimum payment
  • Using credit monthly and paying it down monthly

It might take some time to increase your credit rating, but you’ll usually start to see improvement in your score in a few months.

If you have bad credit and aren’t willing to wait for your credit score to improve, some tips will help you find affordable coverage. The following are three ways to decrease your monthly rates with bad credit:

Change Your Coverage Type

Raising your deductibles and reducing any unnecessary coverages can help lower your rates. You can obtain the lowest possible rates by only carrying the minimum coverage required by your state.

Switch Car Insurance Companies

Sometimes switching to another car insurance company will allow you to find lower rates. When considering switching companies, make sure to obtain multiple quotes that you can compare.

Consider Your Vehicle

Your vehicle is a factor that goes into determining your car insurance rates. Expensive cars can cost more to insure, so purchasing a more affordable car and paying off the loan might lower your rates.

Why do car insurance companies use credit history?

Car insurance companies use several data points to predict the risk of customers. Information is gathered from internal investigation and studies from the Federal Trade Commission to make their risk determination. These companies apply higher rates to customers deemed riskier.

Studies into the risk of insuring drivers have shown that those with poor credit are more likely to file claims than those with excellent credit. Additionally, the payouts to those with poor credit tend to be higher than to those in other credit pools.

These investigations and studies are why the best car insurance companies quotes for bad credit are higher. The companies have determined that it is riskier to insure those with poor credit than those with good credit. If you’re looking for no-credit-check auto insurance companies, you’ll only find them in California, Hawaii, Massachusetts, and Washington.

How to Find the Best Car Insurance Companies for Bad Credit

Car insurance companies use credit scores as a factor in determining rates. Bad credit will increase your rates, but there are also ways to lower your monthly payments.

Shopping for quotes and asking about discounts from the best auto insurance companies for bad credit in your area will help you find the most affordable coverage.

Now that you know about the best car insurance companies for bad credit, enter your ZIP code to get free auto insurance quotes in your area.