What Does Car Insurance Cost if You Have Bad Credit?

The average cost for six months of car insurance for people with bad credit is $1,458, though many variables will determine your rate. 

Car insurance companies take into account your age, location, vehicle type, and driving history when determining your insurance premium (how much the policy is going to cost you). However, one of the biggest determining factors is the credit-based insurance score. These scores are determined by data from the same companies that calculate your credit score. The following sections will discuss the reason credit impacts your premium and how to get discounts to save some money. 

Key Takeaways:

• Credit score is a factor in determining your insurance rates in 45/50 states.

• People with lower credit are likely to pay a much higher premium than those with higher scores. 

• It is important to compare company quotes by shopping around to ensure you get the best rate. 

Average Car Insurance Cost for Folks With Poor Credit

Methodology

These averages are based on data collected using a sample profile. The profile was based on a full coverage policy for a 30-year-old adult with a clean driving record and poor credit. Poor credit is considered to be anywhere from 300 to 579. The data was collected from zip codes across the US to determine the overall averages for each company. 

In the end, we found USAA to have the lowest average across states, but membership is dependent on military affiliation and, therefore, not accessible to everyone. GEICO and Nationwide were found to be similarly accommodating to those with lower credit scores. 

Why Do Car Insurance Companies Look at Credit Scores?

Insurance companies use your credit to determine how likely you are to make a claim. The idea is based on research completed by the Federal Trade Commission stating that people with better credit scores tend to get into fewer accidents and cost the insurance company less money. People with lower credit tend to make more claims, and are a higher-risk client for the insurance company. 

There are a few states that do not allow or restrict insurance companies' use of credit to determine premiums. The four states that prohibit the use of credit as a determining factor outright are California, Hawaii, Massachusetts, and Michigan. Maryland and Oregon prohibit the use of credit to deny coverage, cancel a policy, or increase your premiums at renewal. In Utah, discounts may be offered to those with excellent credit, but companies cannot use your credit information to charge you more. All other states allow, in some form, the use of your credit score in determining your premium. In another Expertise.com article on insurance premiums across the US, New York and Louisiana rank among the highest insurance premiums, while states such as Vermont and Maine rank the lowest. Credit is not the only determining factor, though it is the factor that will have the most significant impact on your rates. 

It’s important to note that auto-insurance companies use soft inquiries, which do not negatively impact your credit score. Make sure to shop around different insurance companies to compare quotes. Smaller or independent companies may have better prices to offer, so be sure to expand outside of the popular names. 

How To Get Discounts on Car Insurance

As we have already learned above, having bad credit can nearly double your premium insurance cost. While they are unlikely to negate the higher premium, discounts can make the cost easier to bear. Finding the right discounts, as well as fine-tuning the coverage on your car, will help to save some dollars on your monthly car insurance cost. 

Shop around

We’ve mentioned it a few times now, but shopping around can be the ticket to ensuring you get the best rates. As mentioned in our article about current car insurance rates, we recommend you secure quotes from at least three different companies before making any decisions. 

Telematic based policies

Many car insurance companies offer discounts based on telematics. Telematics in insurance are usage-based policies that depend on devices that monitor and adjust policies based on the driver's habits and mileage. This system rewards good drivers with lower premiums by collecting their data as they drive around. 

Discounts offered by the agency

Many companies offer discounts when you bundle other policies (renter’s insurance or multiple cars), as well as senior and military discounts. You can save money on your premiums by making simple choices, such as going paperless with your bills or using electronic signatures. Ask about discounts for safety and anti-theft features on your car. 

Fine tuning your policy

Though it is impossible to know whether you will need to file a claim, if the situation is unlikely, you may opt for a policy with a higher deductible for comprehensive and collision coverage. This means that you will pay more out of pocket in the chance you need repairs, but it usually equates to a lower premium. Further, according to the Insurance Information Institute, if your car is worth less than 10x the insurance premium, it is worth the money to reduce optional collision or comprehensive coverage. 

How To Find the Best Car Insurance Agency for Your Coverage

By now, it is clear that a little investigation must be done to ensure you find the best rates for the coverage you need. Expertise.com can help to lessen the stress of finding an agency with our directory. Each company is put through a rigorous selection process to uncover the best-rated companies in your zip code. From combing through reviews to secret shopper visits, we have done the research for you. Check out the Top-Ranked Insurance Providers in your area!