Best Cheap Car Insurance for Bad Credit
Best Cheap Car Insurance for Bad Credit
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Geico offers the lowest auto insurance rates for drivers with bad credit among companies available to all drivers, according to our analysis of top insurers. USAA offered the lowest rates overall for those with lower credit scores, but the company's coverage is only available to military members, veterans and some family members of those in the military.
Across 47 states that allow credit rating to factor into car insurance rates, poor credit raises prices by 61% per year. By comparison, Geico only raises its rates by 33%, while Nationwide raises rates 30%.
Insurers tend to charge higher rates for drivers with bad credit scores because they correlate with filing more claims and higher costs for insurers.
Rates differ by state, so to get the best price, make sure to get quotes from multiple insurers.
Cheapest car insurance for bad credit: Geico
Geico offers the cheapest auto insurance nationally for those with bad credit. The average annual premium of $2,386 per year for full coverage was $66 cheaper than Farm Bureau.
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Geico is among the largest insurers in the country and offers some of the best rates for drivers with poor credit. In 16 states, it has the best rates of any non-USAA insurer. Geico also ranked second or third in 11 other states. Drivers with poor credit paid an average of $199 per month with Geico. The company only raised rates 33% for drivers with bad credit as compared to policyholders with average credit.
Farm Bureau is a federation of state organizations, most of which offer insurance to farmers and non-farmers. A full-coverage policy for a driver with poor credit is $204 per month. Policyholders have to pay an annual membership fee, but it is usually less than $100. Coverage is not available in all states, as some Farm Bureaus contract through other companies to offer insurance.
USAA is the cheapest option overall for drivers with bad credit. The insurer operates in every state and Washington, D.C. Full-coverage auto insurance costs $161 per month for an annual policy, on average, which is the lowest rate by far. Don't rank USAA because its quotes and policies are available to a more limited group: active military members, veterans and some of their family members. But it is the fifth-largest auto insurance company in the country, with a larger proportion of the market than Allstate or Farmers.
Best auto insurance for average credit: State Farm
State Farm offered the best rate for drivers with average credit, with an annual premium $205 cheaper than any other option, save for USAA. Erie had the second-lowest annual rate, quoted at $1,464.
Farm Bureau, Auto-Owners, Geico and American Family also offered better-than-average rates.
Rank | Company | Annual rate |
|---|---|---|
| 1 | State Farm | $1,259 |
| 2 | Erie | $1,464 |
| 3 | Farm Bureau | $1,534 |
| 4 | Auto-Owners | $1,606 |
| 5 | Geico | $1,798 |
| 6 | American Family | $1,817 |
| 7 | Travelers | $1,965 |
| 8 | Nationwide | $2,056 |
| 9 | Progressive | $2,059 |
| 10 | Farmers | $2,522 |
| 11 | Allstate | $2,724 |
| N/A* | USAA | $1,140 |
*USAA is only available to current and former military members and their families.
Cheapest car insurance for very good credit
The best rates for drivers with very good credit came from State Farm, which charges those drivers, on average, $953 per year for full coverage. That rate comes in even lower than USAA, which charges $997.
Having very good credit dropped State Farm’s rates 24%. Erie, Travelers and Progressive all also saw prices fall by more than one-fifth.
Rank | Company | Annual rate |
|---|---|---|
| 1 | State Farm | $953 |
| 2 | Erie | $1,116 |
| 3 | Auto-Owners | $1,326 |
| 4 | Farm Bureau | $1,368 |
| 5 | Geico | $1,445 |
| 6 | American Family | $1,556 |
| 7 | Travelers | $1,570 |
| 8 | Progressive | $1,613 |
| 9 | Nationwide | $1,679 |
| 10 | Farmers | $2,196 |
| 11 | Allstate | $2,275 |
| N/A* | USAA | $997 |
*USAA is only available to current and former military members and their families.
No-credit-check insurance companies
California, Massachusetts and Hawaii do not allow insurers to use credit scores as part of setting car insurance rates.
Very few insurance companies that provide a policy without a credit check. Most no-check insurers are local, and even then, they're uncommon.
A few examples are Dillo in Texas and Cure Auto Insurance in New Jersey and Pennsylvania. But they are exceptions, as 92% of insurers factor in credit history, according to a survey from Conning.
When an insurer asks for your Social Security number before providing a quote, this is to check your credit. Although some insurers might not check your credit before providing you with a quote, most of the time they will check your credit before providing a final rate.
Why insurance is more expensive for drivers with bad credit
Insurers charge drivers with low credit scores higher rates because there is a correlation between bad credit and an increased likelihood of filing a claim, according to a Federal Trade Commission report.
Drivers who file a claim cost insurers money, either because the driver is at fault in an accident or because of a loss covered by comprehensive or collision insurance. And because insurers increase rates for customers they expect will have higher insurance payouts, drivers with poor credit end up with higher rates than those with excellent credit.
Drivers with no credit history are treated similarly to drivers with bad credit scores, and they generally have higher auto insurance costs.
To mitigate risk, insurers usually assume that individuals with no credit are as risky to insure as those with bad credit histories.
How to lower your rates if you have bad credit
The best way to lower your insurance rates if you have bad credit is simply to work on improving your credit score. Your credit score helps lenders determine how likely you are to repay debt.
It is not an easy process, but the benefits of improving your credit can be wide-ranging. A few ways to raise your credit score include:
Making on-time payments: Making your credit payments on time is one of the best ways to improve your credit, as payment history is the biggest factor in your credit history. It accounts for 35% of your FICO Score.
Use only a portion of available credit: The ratio of the credit you use compared to the credit that is available to you is known as your credit utilization ratio. Maintaining a ratio below 30% is a great way to improve your credit rating, as credit utilization accounts for 30% of your credit score. For example, if you have a credit card with $1,000 of available credit, you want to maintain a balance of no more than $300.
Paying your insurance bills on time will not help your credit score, but missing payments could hurt both your score and your rate.
Beyond improving your credit, you can take a few more traditional steps to potentially lower your insurance rates.
- Looks for discounts, such as good driver discounts, good student discounts or multiple policy discounts.
- Scale back coverage if you can afford to have less liability, collision or comprehensive protections.
- Shop around, as looking at multiple options can help you get the best deal.
Frequently asked questions
Can I get car insurance with bad credit?
Yes, but it will likely be more expensive. Poor credit raised rates an average of 61%, our study found.
Why does bad credit raise car insurance rates?
Drivers with bad credit tend to file more claims than drivers with better credit, according to a Federal Trade Commission report. That means they are ultimately more expensive to insure for companies. Being more expensive to insure usually means paying higher rates.
Can I get insurance with no credit check?
You can, but only in some instances. Relatively few companies offer insurance without a credit check. Most cater to high-risk drivers, which means their rates are often high anyway.
How can I lower my rates if I have bad credit?
The best path is working to improve your credit score with sound financial decision-making and by paying your bills in a timely manner. You can also look for discounts, shop around and scale back your coverage to reduce your insurance costs.
Methodology
Data was collected from the largest insurers in 47 states. The sample driver was a 30-year-old man with a 2015 Honda Civic EX. Rates are for a full-coverage policy.
Insurance companies do not all share the same definitions of poor, average and very good credit. Beyond that, a particular market can affect what the cutoffs might be.
This analysis used insurance rate data from publicly sourced insurer filings using Quadrant Information Services. These quotes should be used for comparative purposes only, as your rates may be different.
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