Cheapest Car Insurance Companies for Bad Credit in 2024
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UPDATED: Jul 8, 2023
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- Car insurance companies use credit history when considering risk
- Four states have banned car insurance companies from using credit history when determining risk
- Improving your credit score will help you get better rates
Car insurance companies use various factors to determine a driver’s risk, including credit scores. Someone with good credit is more likely to make timely payments than someone with poor credit. Therefore, improving your credit score can result in cheaper car insurance.
When comparing companies, you’ll find that USAA has the lowest rates for drivers with poor credit. Meanwhile, MetLife has the highest rates for people with poor credit scores. However, you can lower your rates by bundling discounts.
Continue reading to learn how to get the lowest rates from the best car insurance companies for bad credit.
Before learning about the best car insurance companies for bad credit, enter your ZIP code to get free auto insurance quotes in your area.
What are the best car insurance companies for bad credit?
According to the Insurance Information Institute, car insurance companies use multiple factors to determine rates. One of these factors is a person’s credit score, which indicates how likely they are to make timely payments.
It can be challenging to find the best affordable car insurance companies for bad credit. While most companies consider a person’s credit when determining rates, they weigh the importance of this factor differently.
Comparing the best car insurance companies’ rates for bad credit will help you find the most cost-effective coverage. The following chart shows how your credit score will affect your annual rates based on the company and credit type.
Average Annual Rates from the Best Car Insurance Companies for Bad CreditCompany | Poor Credit | Fair Credit | Good 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 |
As you can see, rates are higher for customers with poor or fair credit than those with good credit. While USAA has the best auto insurance for poor credit, it only provides coverage for military members, veterans, and their immediate families.
GEICO has the lowest rates for non-military members of all credit types. Conversely, MetLife provides the most expensive coverage for drivers.
While most states permit the use of credit history when determining rates, California, Hawaii, Massachusetts, and Washington don’t allow companies to take credit history into account. This restriction is because legislators in these states feel that credit score evaluations put low-income drivers at a disadvantage.
Since these states don’t allow credit checks, it’s much easier to find insurance companies that do not use credit scores in these locations.
When comparing states that allow credit scores, you’ll find that North Carolina has the lowest average annual rate for drivers with poor credit at $1,148.66. Meanwhile, Michigan has the highest average yearly rate for drivers with poor credit at $8,640.46.
What is no-credit-check auto insurance?
As previously mentioned, most auto insurance companies consider your credit score when setting rates. However, some insurance companies don’t use credit scores, even if the state allows a credit check.
Coverage from no-credit-check auto insurance companies will usually cost more because of the increased risk. However, if your credit score makes it hard to obtain coverage, this might be a cheaper option than the most popular insurance companies.
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How can you save on coverage from the best car insurance companies for bad credit?
The best way for drivers to lower their car insurance rates is to compare quotes from various companies and bundle discounts. Combining various available discounts can help someone with poor credit significantly reduce their rates.
Auto insurance companies offer various deals to customers. Companies base these savings opportunities on multiple factors, including your vehicle, driving habits, and lifestyle. Asking about discount opportunities will ensure you find all the deals for which you qualify.
The following chart shows the standard discounts that can help you obtain the best car insurance companies’ quotes for bad credit.
Discounts from the Best Car Insurance Companies for Bad CreditCar Discount | Discount Eligibility |
---|---|
Accident-free | Drivers with no accidents in the past three to five years. |
Anti-lock brakes | Cars with factory-installed anti-lock brakes. |
Anti-theft | Cars include anti-theft devices, like alarms, tracking systems, and kill switches. |
Defensive driving | Completed approved defensive driving course. |
Good student | High school or college students with at least a 3.0 grade point average. |
Homeowner | Insured owns a single-family home. |
Low mileage | Driving 5,000 to 15,000 miles per year. |
Multi-car policy | Insure more than one car on a single auto insurance policy. |
Multi-policy | Bundling different types of insurance. |
Paid in full | Policy is paid in one payment. |
Safe driver | Display safe driving habits, like having passengers wear seat belts, low driving speeds, and less aggressive driving. |
Student away at school | College-aged children that attend college over 100 miles away and leave their car at home. |
Some companies provide a discount for taking part in a telematics program. These programs use a mobile app or device to monitor your driving habits, such as speed and braking. If the telematics device shows that you’re a safe driver, you get lower rates.
In addition to these discounts, drivers with bad credit can lower their auto insurance rates by improving their credit scores. There are multiple ways that you can increase your credit rating, including:
- Setting up automatic bill pay: Automatic bill pay will ensure that you pay all your bills on time.
- Paying off balances every month: Your credit score indicates the likelihood that you’ll make timely payments, so paying off your balances each month will improve your rating.
- Working with credit agencies: Applications for additional credit cause hard credit inquiries, which can cause your credit score to drop.
- Disputing errors: Sometimes, a poor credit score results from an erroneous report of payment delinquency or identity theft. Regularly checking your credit report and disputing any errors will allow you to dispute any errors.
It will usually take a few months before you start seeing an improvement in your credit score. In the meantime, there are some additional ways that you can lower your insurance rates. The following tips will help you lower your rates while you improve your credit score.
Change Your Coverage Type
Car insurance companies price auto coverage individually, so the amount you pay depends on how much coverage you have. Therefore, only carrying the minimum required coverage can result in significant savings.
You can also raise your deductible to save money. This move will cause you to pay more if you get into an accident, but insurance companies will usually lower your rates because it decreases their risk.
Switch Car Insurance Companies
Most car insurance companies use the same factors when determining rates but weigh those factors differently. For example, while one company might consider bad credit an urgent concern, others might only consider it a minor setback.
If your rates are higher than you can afford, there’s a chance that another company will provide lower rates. Asking about all saving opportunities when inquiring about rates will ensure that you get the most cost-effective coverage possible.
Consider Your Vehicle
Insurance companies consider the risk of specific vehicles when determining rates. For example, sports car owners are likely to drive faster than other drivers, making them riskier to insure. As a result, car insurance costs more for those drivers.
If you own an expensive car that insurance companies consider high risk, switching to an inexpensive and safer vehicle could result in your rates decreasing. It can also help if you pay off your loan, something that’s easier to do with a less expensive car.
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Why do the best car insurance companies for bad credit use credit history?
Car insurance companies use various data points to determine the risk of drivers. These data points come from experiences with customers and studies from the Federal Trade Commission, and applicants deemed riskier will receive higher rates.
Studies have shown that drivers with poor credit scores are more likely to file claims than customers with good credit. Additionally, payouts to customers with poor credit are generally higher than other credit pools. These factors make drivers with poor credit riskier to insure.
Insurance companies also know that credit scores and income tend to rise and fall together. Therefore, someone with poor credit likely has lower earnings, making them less likely to pay for minor damages out of pocket instead of filing a claim.
When you buy car insurance, companies usually make soft credit inquiries, which shouldn’t impact your credit score. Additionally, buying coverage is the only action that will affect your credit score. So shopping for quotes won’t harm your credit score either.
Case Studies: Cheapest Car Insurance Companies for Bad Credit
Case Study 1: John – Improving Credit Score for Lower Rates
John, a 30-year-old driver with bad credit, was paying high premiums for his car insurance. Determined to lower his rates, he took steps to improve his credit score. By paying bills on time, reducing his debt, and managing his credit responsibly, John saw a gradual increase in his credit score. Allowed him to secure lower rates and save significantly on his premiums.
Case Study 2: Sarah – Bundling Discounts for Affordable Coverage
Sarah, a 25-year-old driver with bad credit, was searching for ways to reduce her car insurance costs. She discovered that many insurance companies offer discounts for bundling multiple policies, such as combining auto and renter’s insurance. Sarah decided to bundle her car insurance with her renter’s insurance and found that she qualified for a substantial discount.
Case Study 3: Mark – Switching Car Insurance Companies for Better Rates
Mark, a 40-year-old driver with bad credit, was unhappy with the high premiums he was paying for his car insurance. Seeking better rates, he decided to shop around and compare quotes from different insurance companies. Mark discovered that while some companies considered bad credit a significant factor, others weighed it less heavily.
Best Car Insurance Companies for Bad Credit – The Bottom Line
Car insurance companies often use credit scores when determining rates. You’ll find that poor credit usually results in higher rates, but bundling discounts and shopping for quotes will help you find the best quotes.
Generally, USAA has the lowest rates for drivers with bad credit, and GEICO has the lowest rates for non-military members. On the other hand, MetLife has the highest auto insurance rates for people with bad credit.
Understanding where to find the best car insurance companies for bad credit and how to lower your rates will help you get affordable coverage.
Now that you know about the best car insurance companies for bad credit, enter your ZIP code to find free auto insurance rates in your area.
Frequently Asked Questions
What are the best car insurance companies for bad credit?
According to the Insurance Information Institute, car insurance companies consider credit scores when determining rates. USAA has the lowest rates for drivers with bad credit, while GEICO offers the lowest rates for non-military members. MetLife tends to have the highest rates for people with bad credit.
What is no-credit-check auto insurance?
No-credit-check auto insurance is coverage provided by some insurance companies that do not use credit scores to determine rates. However, this type of coverage is usually more expensive due to the increased risk involved.
How can I save on coverage from the best car insurance companies for bad credit?
To save on car insurance with bad credit, it’s recommended to compare quotes from different companies and take advantage of available discounts. Bundling discounts and improving your credit score can also help lower your rates.
Why do the best car insurance companies for bad credit use credit history?
Car insurance companies use credit history because studies have shown that drivers with poor credit scores are more likely to file claims and tend to have higher payouts. Insurance companies consider this data to assess the risk associated with insuring drivers with poor credit.
Can shopping for car insurance quotes impact my credit score?
When you shop for car insurance quotes, insurance companies usually perform a soft credit inquiry, which does not impact your credit score. Your credit score is typically affected only when you purchase coverage.
Are there any states that do not consider credit history when determining car insurance rates?
Yes, there are a few states that prohibit insurance companies from using credit history in rate calculations. These states include California, Hawaii, Massachusetts, and Washington.
How can I improve my credit score to obtain better car insurance rates?
Improving your credit score can help you secure better car insurance rates. Some ways to improve your credit score include paying bills on time, reducing debt, keeping credit card balances low, and regularly checking your credit report for errors. It may take some time to see significant improvements, but every positive step can make a difference.
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