It feels unfair, but in most of the country a low credit score can raise your car insurance bill even if you have never caused a crash. Finding cheap car insurance for bad credit starts with understanding why that happens and where you have room to save. The good news is that your credit is not the only thing insurers look at, and there are real ways to bring your rate down.
Here is how credit affects your premium, which states ban the practice, and the steps that can lower what you pay.
Key facts at a glance
| Detail | What to know |
|---|---|
| What insurers use | A credit-based insurance score, not your regular credit score |
| The cost gap | Poor credit drivers can pay far more than excellent credit drivers |
| States that ban it | California, Hawaii, Massachusetts, and Michigan |
| How common | Most auto insurers factor it in where allowed |
| How to save | Compare quotes, improve credit, and stack discounts |
Coverage and rates vary by company and state, so your results will differ.
How credit affects your car insurance rate
Most insurers use something called a credit-based insurance score. It is built from parts of your credit history, but it is not the same as the FICO score a lender checks. Insurers say it helps predict how likely you are to file a claim.
As of July 2026, roughly 95% of auto insurers use a credit-based insurance score where it is allowed. So in most states, your credit history quietly shapes the price you pay, and a weak score can push you into high risk car insurance pricing tiers.
How big is the gap
The difference can be large. As of July 2026, an Insurify study found drivers with poor credit paid an average of about $2,602 a year, compared with roughly $1,853 for drivers with excellent credit. That is close to a 40% gap driven largely by credit.
Insurify
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Why insurers do it
Insurers argue that credit-based insurance scores correlate with claim risk. Critics argue the practice can penalize lower-income drivers who have done nothing wrong on the road. Both views exist, and the debate is part of why some states have stepped in.
States that ban credit-based insurance scores
Not every driver is affected. A handful of states block insurers from using credit-based insurance scores at all when setting car insurance rates.
The four full-ban states
As of July 2026, California, Hawaii, Massachusetts, and Michigan do not allow insurers to use credit scores to price car insurance. California banned it decades ago under Proposition 103, and Michigan removed it as part of a broader insurance reform. In these states, your driving record and other factors carry the weight instead.
States with partial limits
Other states restrict rather than ban the practice. As of July 2026, states such as Maryland, Oregon, and Utah limit how insurers can use credit, and a few others cap specific uses. If you live in one of these states, credit may still matter, just less than elsewhere. Terms and conditions apply.
How to find cheap car insurance for bad credit
Even with a low score, you have more control than it feels like. The trick is to work several levers at once.
Compare quotes aggressively
Insurers weigh credit differently, so the company that punishes your score hardest is rarely the cheapest. Getting several quotes is the fastest way to find a better price. A marketplace like Insurify lets you compare many carriers at once and spot which ones treat your credit more kindly. Some insurers, including certain digital carriers like Lemonade, structure pricing differently, so it helps to look beyond the big traditional names.
Lemonade
Lemonade
Insurance that's fast, affordable, and actually feels good. Lemonade uses AI to process claims in seconds and donates leftover premiums to causes you care about. Get renters, home, pet, life, or car insurance — all from one app.
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Varies by policy (renters insurance from ~$5/mo)
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Cons
Limited home insurance availability (28 states + DC only).
Look for companies that weigh credit less
A few of the best car insurance companies lean less on credit or skip it in certain situations. As of July 2026, some carriers advertise that they do not use credit scores at all in specific states. Comparing widely helps you find them.
Ways to lower your rate over time
Shopping around helps today. Improving your credit helps for years to come. Both are central to how to lower car insurance when your score is working against you.
Improve your credit-based insurance score
Because a better credit profile can mean a lower premium, working on your credit is a long-term insurance strategy, not just a borrowing one. Paying bills on time, lowering card balances, and fixing report errors can all help. A credit-monitoring resource like Creditship.ai can help you track your progress and catch problems early, which supports the credit health that insurers reward.
Creditship
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Stack the discounts you already qualify for
Ask about discounts for safe driving, bundling renters and auto, paying in full, low annual mileage, and taking a defensive driving course. If a credit card is tight, you can also look for car insurance you can pay with a checking account to keep payments manageable. Raising your deductible can also lower your premium, though it means paying more out of pocket after a claim. There is no guaranteed savings here, so weigh the trade-offs for your budget.
The bottom line
Cheap car insurance for bad credit is possible, it just takes more effort. Know how your credit-based insurance score works, check whether your state limits the practice, and combine smart shopping with steady credit improvement. Over time, a stronger credit profile and the right carrier can meaningfully cut your bill.
Want to see who offers the best rate for your situation? Use Firstcard to compare car insurance options side by side and find coverage that fits your budget.
Frequently Asked Questions
Why does bad credit raise my car insurance rate?
Most insurers use a credit-based insurance score, which they say predicts how likely you are to file a claim. Where the practice is allowed, a lower score can push your premium higher even with a clean driving record. The gap between poor and excellent credit can reach roughly 40%.
Which states do not use credit for car insurance?
As of July 2026, California, Hawaii, Massachusetts, and Michigan ban the use of credit scores in car insurance pricing. A few other states, such as Maryland, Oregon, and Utah, restrict the practice rather than banning it. In these states, factors like your driving record matter more.
Can improving my credit lower my car insurance?
Often yes, over time. A stronger credit profile can lead to a better credit-based insurance score, which may reduce your premium at renewal in most states. Paying bills on time and lowering balances helps, and a tool like Creditship.ai can help you track your progress.
How do I find the cheapest car insurance with bad credit?
Compare quotes from several insurers, since each one weighs credit differently. Look for carriers that lean less on credit, and stack discounts for safe driving, bundling, and low mileage. Coverage and rates vary, so the best deal depends on your situation.
