Car Insurance With Bad Credit: How to Pay Less

In most states, car insurance companies are allowed to use a credit-based insurance score when they set your rate. Drivers with weaker credit often pay noticeably more for the same coverage — even with a clean driving record. The good news is that carriers weigh credit very differently, and there are several ways to bring the cost down.

Why credit affects your car insurance

Insurers use a credit-based insurance score, which is built from parts of your credit report such as payment history, outstanding debt and length of credit history. It is not the same as the credit score a lender uses, and checking it for a quote does not hurt your credit.

A few states, including California, Hawaii and Massachusetts, do not allow insurers to use credit when pricing auto policies. If you live elsewhere, credit is likely one of the factors in your rate.

Shop more carriers than usual

Because every carrier builds its own pricing model, how much credit moves your rate can vary a lot from one company to the next. The carrier that is cheapest for a driver with excellent credit is often not the cheapest for a driver with poor credit. That makes comparing quotes especially worthwhile when your credit is not where you want it to be.

Ways to lower the cost

• Raise your deductible if you have savings to cover it.
• Drop collision and comprehensive on an older car you could afford to replace.
• Ask about usage-based programs that price you on how you actually drive, through an app or plug-in device.
• Bundle your auto policy with renters or home insurance.
• Take a defensive driving course if your carrier offers a discount for it.
• Ask about every discount you might qualify for — many are not applied automatically.

Improve your credit, then ask for a re-rate

Paying bills on time and lowering the balances on your credit cards are the steps that tend to help most over time. As your credit improves, ask your insurer whether they will re-check your insurance score at renewal — or compare quotes again, since a better score can change which carrier comes out cheapest.

Watch out for payment-plan fees

Monthly installment plans can carry fees. If you can pay for the full term up front, you may avoid them and qualify for a paid-in-full discount. If you cannot, ask each carrier what their installment fees are so you compare the true cost.