Drivers With No Credit History (or Poor Histories) Pay the Most for Insurance in These 10 States

Drivers With No Credit History (or Poor Histories) Pay the Most for Insurance in These 10 States

Credit scores are a big factor affecting car insurance rates that consumers may not think about. And depending on their credit history, their insurer and where they live, drivers could be paying double the amount they would otherwise.

Many consumers are aware that credit plays an important role in their finances. Having a low credit score or no credit score could mean paying higher interest rates on loans or putting down a deposit to secure the loan. But there's another personal finance product that credit scores can greatly affect: car insurance.

ValuePenguin found that major insurers charge an average of 58% more for drivers who have no credit history (or a poor credit history) than those with an excellent credit score (these categories are defined in our methodology).

But depending on the state, drivers could be charged even more. Insurers in Michigan, Minnesota, Utah and Texas more than doubled the premium cost for people with low or no credit scores compared to people with excellent credit.

The 10 states where auto insurance rates increase the most for those with poor credit

ValuePenguin collected insurance quotes from many of the biggest insurers in every state and compared prices charged to a driver with poor or no credit history versus the same driver with an excellent credit history. Michigan, already an expensive state for auto insurance regardless of credit history, saw the biggest increase in insurance rates, which nearly quadrupled.

Read on to see which insurers charge the most for drivers with poor credit or no credit history.

1. Michigan

  • Average cost of car insurance with excellent credit: $1,341
  • Average cost of car insurance with poor or no credit: $5,282 (+294%)

Already the most expensive state for car insurance because of requirements for unlimited personal injury protection insurance, Michigan easily saw the biggest increase for drivers with poor credit, with the cost of car insurance jumping by a multiple of four.

Much of this increase is driven by Hanover Insurance, the sixth biggest insurer in the state, which raised rates on a driver with poor credit by a staggering 1,258%. But even if you exclude Hanover, Michigan drivers with poor credit still paid three times more than those with excellent credit, led by AAA, which raised rates by almost 400%.

Of the major insurers in our sample, USAA penalized drivers the least. It raised rates by only 64%.

2. Minnesota

  • Average cost of car insurance with excellent credit: $477
  • Average cost of car insurance with poor or no credit: $983 (+106%)

Though Minnesota ranked a distant second, insurers in this state more than doubled auto insurance rates for drivers with bad credit.

The two companies contributing the most to the increase were Farmers (which tripled insurance rates) and Allstate (which more than doubled rates). These are the fourth and fifth largest insurers in the state, respectively.

Like in Michigan, drivers who have a policy with USAA had the smallest penalty: only 7%.

3. Utah

  • Average cost of car insurance with excellent credit: $547
  • Average cost of car insurance with poor or no credit: $1,105 (+102%)

Like in Minnesota and Texas, big insurers in the Beehive State double insurance rates for drivers with poor credit.

The main contributor is State Farm, the largest insurer in the state by market share. The average price of a minimum-coverage policy in Utah is $399 with State Farm if a driver has excellent credit. The same driver with poor credit is charged $1,123.

The Utah insurer that penalizes drivers with poor credit the least? Allstate, which raised rates by 70%.

4. Texas

  • Average cost of car insurance with excellent credit: $547
  • Average cost of car insurance with poor or no credit: $1,105 (+102%)

Texas insurers doubled their rates for drivers with poor credit. GEICO, the second biggest car insurance company in the state, raised prices by almost 150% for our sample driver, from $431 per year to $1,067 per year.

Once again, the insurer that penalizes drivers the least is USAA, raising rates by 24%.

5. Georgia

  • Average cost of car insurance with excellent credit: $588
  • Average cost of car insurance with poor or no credit: $1,114 (+89%)

In Georgia, which comes in fifth, there's a decline in how much drivers are penalized. Rates go up by almost 90%, which is still far above the national average, but a notably lower penalty than the top four states.

State Farm is the second biggest auto insurance company in Georgia and the main driver of the Georgia rate penalty. State Farm's average rates jumped from approximately $500 to more than $2,500 per year.

Every other insurer raised rates by 53% or less, including the Georgia Farm Bureau, which did not penalize our driver for having poor or no credit history and charged an average of $512 per year regardless.

6. Arizona

  • Average cost of car insurance with excellent credit: $538
  • Average cost of car insurance with poor or no credit: $980 (+82%)

Arizonans see a wide range of rate changes depending on whether their credit is poor or excellent.

State Farm, the second biggest insurance company in the state, is yet again a major contributor to higher prices for those with poor credit. It charges almost three times as much as it does when a driver has excellent credit. Farmers Insurance charges more than double.

USAA (+28%) and GEICO (+33%) are the two Arizona insurers in our sample that penalize customers the least.

7. Kentucky

  • Average cost of car insurance with excellent credit: $735
  • Average cost of car insurance with poor or no credit: $1,338 (+82%)

Like in Arizona and Missouri, insurers in Kentucky raised their premiums for drivers with poor credit by 82%.

Although GEICO is generally one of the more forgiving companies for drivers with poor credit, in Kentucky it penalizes drivers the most of any insurer, raising rates by 139%.

The company that penalizes Kentucky residents the least? Nationwide. Although Nationwide has some of the highest base rates in the country, it does not raise its rates substantially if a driver has poor credit.

8. Missouri

  • Average cost of car insurance with excellent credit: $481
  • Average cost of car insurance with poor or no credit: $874 (+82%)

The Show Me State ranks as the 31st cheapest state when you have poor credit and the 29th cheapest state when you have excellent credit.

The main insurer driving up the average for those who have poor credit is AAA of Missouri, which almost triples its rates. However, it's only the 10th biggest insurer in the state, and residents have plenty of other options.

USAA (+24%) and Shelter Insurance (+34%) penalized our sample driver less than any other company for having poor credit in Missouri.

9. Florida

  • Average cost of car insurance with excellent credit: $1,470
  • Average cost of car insurance with poor or no credit: $2,565 (+74%)

Florida is one of the most expensive states for car insurance whether you have good or bad credit. But with insurance rates going up by 74% if you have poor or no credit, Floridians can save hundreds — or even thousands — of dollars per year by getting their finances in order.

Florida doesn't have as many outliers as other states, as all companies sampled charge 60% to 100% more for drivers with poor credit. GEICO is the most onerous, as the average rates double for drivers with poor or no credit. State Farm — usually one of the companies with the biggest penalties — raises rates by only 65%. That's high by national standards but low for Florida.

10. New York

  • Average cost of car insurance with excellent credit: $765
  • Average cost of car insurance with poor or no credit: $1,323 (+73%)

New York rounds out the 10 states with the biggest insurance rate increase for drivers with poor or no credit history. The biggest insurers in the state generally increased premiums anywhere from 50% to 95%.

The company that raised rates the least won't be a surprise: USAA, which only increased annual premiums by 23%. Progressive, the fourth biggest insurer in New York, raised rates the most at 96%.

California, Hawaii and Massachusetts: States where your insurance company can't charge you more based on your credit history

Several states have prohibited the use of credit-based car insurance scores in calculating car insurance rates: California, Hawaii and Massachusetts.

In these states, two drivers with very different credit histories but identical driving histories and demographics would pay the same car insurance premiums. In other states, insurers generally charge higher rates depending on credit history. ValuePenguin found the average major insurer charged 58% more for a driver who had poor credit compared to excellent credit.

Drivers can also be penalized for a lack of credit history, which is often equivalent to having a poor credit history in insurers' eyes. Some states (New Jersey and Rhode Island) prohibit insurers from penalizing drivers for a lack of credit history, meaning drivers may be better off with no credit history rather than a poor one.

Prohibitions on using credit scores for pricing help those with poor credit, but hurt those with excellent credit

Using average car insurance prices across all 50 states and Washington, D.C., for an identical driver with poor and excellent credit, we can see that prohibitions on credit-based pricing benefit those with a poor credit history by making policies relatively more affordable. The flip side is that those with an excellent credit history pay relatively more.

For example, Hawaii prohibits using credit scores for insurance pricing. If our sample driver with poor credit got auto insurance quotes in all 50 states and Washington D.C., he would find that Hawaii is the third cheapest state for a policy.

Conversely, if the same driver had excellent credit, he would find that Hawaii is the 26th cheapest state; middle of the pack. These numbers — and those in California and Massachusetts — indicate that those with poor credit histories are benefiting from the laws prohibiting credit-based pricing.

StateAffordability rank when drivers have poor creditAffordability rank when drivers have excellent credit
California13th35th
Hawaii3rd26th
Massachusetts21st38th
Rank are out of 51, representing all 50 states and Washington, D.C.

In 2019, U.S. Rep. Rashida Tlaib sponsored bill H.R. 1756, the Preventing Credit Score Discrimination in Auto Insurance Act, which would prevent the use of credit scores in determining auto insurance rates. Tlaib represents the 13th Congressional District of Michigan, the state in which major insurers penalize drivers for having no or poor credit history at a higher rate than any other.

On March 4, the U.S. House Committee on Financial Services held a hearing on insurance pricing practices that are not related to driving — credit scores included — and whether these practices are fair to use in the process of rate-setting. The debate about whether this type of auto insurance pricing should be prohibited by federal law is ongoing.

How much can drivers save on auto insurance by establishing a credit history or improving their credit scores?

A variety of factors influence car insurance rates, but in the most extreme cases, drivers can potentially save thousands of dollars per year when they establish a credit history or increase their credit score, depending on their insurer.

Below, we've ranked how much a driver can save in each state by having an excellent credit history versus having no credit history. The calculations are based on the biggest insurance companies in the state for which quotes were available. The states where drivers can save the most are naturally the ones in which poor credit is penalized the most: Michigan, Minnesota and Utah.

StateAnnual rates with no credit historyAnnual rates with excellent credit historySavings
Michigan$5,282$1,34175%
Minnesota$983$47751%
Utah$1,105$54750%
Texas$890$44550%
Georgia$1,114$58847%
Arizona$980$53845%
Kentucky$1,338$73545%
Missouri$874$48145%
Florida$2,565$1,47043%
New York$1,323$76542%
DC$1,260$73542%
South Dakota$420$24542%
North Dakota$528$31041%
Illinois$878$51941%
Montana$641$38141%
Colorado$1,075$64540%
Nebraska$599$36140%
Delaware$1,316$79440%
New Hampshire$643$38840%
Oregon$1,136$68740%
Maine$489$29839%
Nevada$1,295$79239%
New Mexico$699$43238%
Kansas$654$40638%
Wisconsin$486$30238%
Idaho$606$37738%
Louisiana$1,329$83237%
Mississippi$749$46937%
Vermont$552$34837%
Washington$706$44637%
South Carolina$854$54037%
Arkansas$677$43136%
Alabama$736$47935%
Ohio$561$36635%
Pennsylvania$615$40634%
Oklahoma$742$49034%
Connecticut$1,192$78834%
Virginia$607$40334%
West Virginia$685$46233%
Indiana$498$33732%
Tennessee$577$39731%
North Carolina$542$38329%
Maryland$1,180$83729%
Wyoming$485$34828%
Iowa$357$26227%
Alaska$485$36425%
New Jersey$1,182$1,1820%
Rhode Island$1,589$1,5890%
Massachusetts$646$6460%
California$574$5740%
Hawaii$475$4750%
New Jersey and Rhode Island drivers can be charged higher rates for a poor credit history, but not for a lack of credit history, which was the variable used in collecting these rates.

Methodology

ValuePenguin's analysis used insurance rate data from Quadrant Information Services. These rates were publicly sourced from insurer filings and should be used for comparative purposes only — your own quotes may be different.

Rates are for a minimum coverage policy for a 30-year-old male driving a 2015 Honda Civic EX.

Car insurance companies use their own proprietary formulas to calculate insurance rates based on credit scores and other factors. Quadrant, our data provider, defined its own insurance policy credit tiers ranging from "worst" to "excellent" by investigating how insurance companies changed prices for different credit scores across thousands of quotes.

ValuePenguin used two of these credit tiers when collecting quotes from the biggest insurers available in each state and then compared average rates. The two credit tiers used were: "none" (indicating no credit history) and "excellent" (indicating a top-tier credit history). Analysis of the quotes showed that drivers with a credit history designated as "none" had similar rates to those with a "below fair to poor" credit history.

The following are the range of credit tiers utilized by Quadrant:

  • Worst
  • Poor
  • Below fair to poor
  • Below fair
  • None
  • Fair to below fair
  • Fair
  • Average
  • Good
  • Very good
  • Excellent

Mark is a Senior Research Analyst for ValuePenguin focusing on the insurance industry, primarily auto insurance. He previously worked in financial risk management at State Street Corporation.

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.