Best Affordable Car Insurance With Low Credit

High-risk insurers offer another potential avenue for drivers with poor credit. Companies like Direct Auto and Dairyland specialize in offering policies to high-risk drivers, though they don’t operate nationwide. While their rates are often higher than average, they can help you stay covered if you’re struggling to find coverage through standard insurers.

Insurance companies use what’s called a credit-based insurance score to help determine how likely a driver is to file a claim, which in turn affects how much they charge for a policy. While this score is calculated using the same credit information that goes into a FICO score, it functions differently.

Your credit score helps determine how likely you are to default on a loan or other line of credit, while an insurance score helps predict the likelihood that you will file a claim. Actuarial data shows that policyholders with low credit are more likely to file claims, making them a higher risk for insurers and meaning they pay more on average for insurance.

Your credit history can affect your insurance rates in all states except California, Hawaii, Massachusetts, and Michigan, which ban insurers from using credit information to determine auto insurance premiums.

Unless you live in one of the four states mentioned above, having low credit will almost always mean you pay more for auto insurance than if you had excellent credit. That said, the following tips will help you keep your rates as low as possible, even with poor credit:

Evaluate Your Coverage Needs and Budget

When purchasing auto insurance, you must make sure to meet the state minimum liability limits. All states require some amount of bodily injury liability coverage, and most require property damage liability as well. Some also require uninsured motorist coverage and/or personal injury protection (PIP). Insurance companies won’t sell policies that don’t meet the minimum required limits, so this is the least amount of coverage you can get.

Minimum coverage is the cheapest option given that it provides the least amount of coverage. If you’re being quoted high rates because of your low credit and are struggling to afford coverage, opting for the state minimum can help you save money on premiums. However, keep in mind that if you’re responsible for an accident that causes a lot of damage, your insurance may not provide enough coverage, and you may end up needing to pay a significant sum out of pocket.

If you can afford to, it’s wise to get more than the minimum liability limits. Depending on the value of your car, you should also consider adding full coverage. Finally, uninsured motorist coverage, if not already required by your state, can be valuable to have as it will help pay for damage caused by a driver without insurance (or without sufficient insurance), ultimately saving you money if you find yourself in that situation.

Speaking to an insurance agent can be helpful to go over your situation and find the best plan that fits your needs and budget.

Check Your Credit Report

If you’re not confident about your credit, you can request a copy of your credit report to verify your score and other information. According to federal law, you have the right to request a free copy of your report every 12 months from the three nationwide credit bureaus: Experian, Equifax, and TransUnion. You can also check your report for free once a week at AnnualCreditReport.com

Being familiar with your credit report is a good best practice in general, but it can be helpful before purchasing car insurance so you can get a better idea of how it might impact your rates. Be sure to also check for any errors and notify the credit bureaus immediately if you find any, so you don’t end up unfairly paying more for insurance (or any other financial products you may be looking at).

Compare Rates

Always get quotes from several companies, especially if the first one or two quotes you get seem high. Again, you should expect higher rates if you have low credit, but comparing multiple quotes will help you get the best possible deal. Even if a company has higher average rates than competitors, it may be the one that offers you the lowest premium.

Look for Discounts

Discounts are a great way to lower your premium, especially if you qualify for more than one. The good news is that every insurer offers discounts — you just need to find the ones you’re eligible for.

Some of the best discounts include those for bundling auto insurance with another type of insurance (like home or renters), safe driving, having safety equipment installed in your car, and insuring multiple vehicles.

Telematics programs offer another discount opportunity — most insurers offer one, and the savings can be significant. You’ll need to download the company’s app and enable location services to allow it to track your driving habits. If you drive safely, you’ll receive a discount. Just make sure you read the fine print, as some companies may actually raise your rate if you drive unsafely.

Finally, some companies, like State Farm, offer low-mileage discounts if you drive fewer than a certain number of miles per year. If you drive less than average, you may also be able to save a substantial amount of money by opting for a pay-per-mile program like Nationwide SmartMiles or Allstate Drivewise. Compare quotes to a traditional policy and crunch the numbers to see if it makes financial sense.

Ask About Payment Options

While this tip won’t help you save money overall, it can be helpful to pay in installments if you can’t afford to pay the full premium upfront. Companies like GEICO allow you to choose the number of installments you’d like to pay in, and some insurers also allow you to choose your payment date so you can make sure it lines up with your paycheck.

Ask about these options when getting a quote to see what’s available. In addition, keep in mind that some companies provide a discount for paying in full, so depending on your situation, it may make more sense to opt for the discount.

Unless you live in California, Hawaii, Massachusetts, or Michigan, you’ll unfortunately need to expect that auto insurance companies will check your credit when calculating your premium. However, they use a soft credit pull, meaning that you don’t need to worry about your credit being impacted by requesting auto insurance quotes.

*Indicates USAA has cheaper rates — however, the company’s availability is limited to military members, veterans, and their families.

Working to improve your credit score is a worthwhile task as it will greatly simplify many financial goals beyond getting auto insurance. It’s not a quick fix, but making a concerted effort over time can make a big impact and can, in turn, help lower your insurance rates.

Here’s what you can do to strengthen your credit:

• Make on-time payments: This is one of the most important things you can do to improve your credit or keep it in good standing. Even if you’re only making minimum payments, making them on time is crucial. Setting up automatic payments can be helpful so you don’t need to worry about missing one.
• Keep your credit utilization low: Your credit cards generally give you a high limit, and it can be tempting to use it. However, doing so will actually hurt your credit. That’s because credit bureaus take your credit utilization into account, which is the amount of credit you use compared to how much you have available. It’s recommended that you keep your credit utilization below 30 percent.
• Limit credit applications: Every time you apply for credit, which involves a hard pull, it will ding your credit score. Keep your credit applications reasonable and try to space them out, as applying for many lines of credit in a short period of time can be a red flag to lenders.
• Become an authorized user: Becoming an authorized user on someone else’s credit card can help improve your credit, assuming it’s a long-established credit card with a strong payment history. If someone you know and trust, such as a family member, is willing to add you as an authorized user, consider doing so, at least temporarily.

At AutoInsurance.com, we evaluate auto insurance providers based on four key factors:

• Price (40%): We analyze average premiums for full coverage for drivers with poor credit (as well as drivers with good credit, for comparison). We also consider available discounts that can help drivers with poor credit save. Full coverage averages use the following limits:
  • Bodily injury liability: $100,000 per person/$300,000 per accident
  • Property damage liability: $50,000 per accident
  • Uninsured and underinsured motorist bodily injury: $50,000 per person/$100,000 per accident
  • Comprehensive and collision: $500 deductible
• Claims Handling (25%): A good claims handling process from an auto insurer is prompt, transparent, and efficient, with clear communication throughout, fair evaluation of damages, and timely payment or resolution. We assess claims practices through sources like the CRASH Network Insurer Report Card and J.D. Power’s Claims Satisfaction Report, and financial strength from sources like AM Best and S&P Ratings. Real-life customer experiences are included when available.
• Customer Experience (25%): We evaluate the ease of the customer journey, from getting a quote and purchasing a policy to making changes or accessing documents. We consider the availability and quality of both online and agent interactions, as well as the functionality of the company’s website and mobile app. Our sources include J.D. Power studies, the NAIC complaint index, BBB ratings, and app store reviews.
• Coverage Options (10%): We review each company’s coverage offerings and value providers with options beyond the state required minimums, like accident forgiveness, gap coverage, rideshare coverage, and more.

Read more about our ratings and methodology.