Car insurance can be expensive, and for individuals with a low credit score, the challenge is even greater. Insurance companies often charge higher rates to those with poor credit, making it crucial to understand how your credit score affects your insurance costs. This guide will help you navigate car insurance options and find the best rates, even if your credit isn’t perfect.
Understanding Credit Scores and Car Insurance
Your credit score is a numerical representation of your creditworthiness, influenced by factors like payment history, credit utilization, and length of credit history. In the U.S., the credit rating scale typically ranges from 300 to 850, with the highest credit score possible being 850. The average American credit score is around 710, but this can vary depending on age and other factors. For instance, the average credit score by age 30 is usually lower than that of older age groups.
Insurance companies use your credit score as part of their assessment when determining your premium. Research shows that individuals with lower credit scores are more likely to file claims, leading insurers to charge them higher rates. If your credit score is poor, you could be paying nearly double the amount for car insurance compared to someone with good credit.
How Credit Score Affects Car Insurance Rates
On average, drivers with poor credit pay about 94% more for car insurance compared to those with a good score. The highest credit score you can get can help you secure the lowest possible rates, while the lowest credit score possible can lead to significantly higher premiums.
For example, Nationwide offers some of the best rates for drivers with poor credit, with an average annual premium of $2,051. On the other hand, State Farm, known for its low rates for good credit, charges almost quadruple the amount for those with poor credit, averaging nearly $8,000 a year.
Comparison of Car Insurance Costs by Company
| Company | Annual Cost for Poor Credit | Monthly Cost for Poor Credit |
| Nationwide | $2,051 | $171 |
| USAA* | $2,450 | $204 |
| Geico | $2,482 | $207 |
| Travelers | $2,699 | $225 |
| Progressive | $3,221 | $268 |
| Westfield | $3,403 | $284 |
| Mercury | $3,583 | $299 |
| Safe Auto | $3,637 | $303 |
| Erie | $3,701 | $308 |
| Allstate | $4,531 | $378 |
| Farmers | $4,889 | $407 |
| Auto-Owners | $5,407 | $451 |
| State Farm | $7,961 | $663 |
Car Insurance Rates by State
Insurance rates for drivers with poor credit vary significantly by state. Some states, like Washington, offer lower rates and smaller increases for poor credit, while others, such as Louisiana and Arizona, have some of the highest premiums.
Certain states, including California, Hawaii, Massachusetts, and Michigan, have banned the use of credit scores in determining auto insurance premiums. However, in the remaining states, your credit score plays a significant role in your insurance costs.
Average Car Insurance Costs by State for Poor Credit
| State | Annual Cost for Poor Credit | Monthly Cost for Poor Credit |
| Washington | $1,812 | $151 |
| Arizona | $7,229 | $602 |
| Louisiana | $7,987 | $666 |
| Idaho | $2,012 | $168 |
| North Carolina | $2,384 | $199 |
| Texas | $4,694 | $391 |
| New York | $5,617 | $468 |
| Georgia | $3,807 | $317 |
| Florida | $6,921 | $577 |
Tips for Getting the Best Car Insurance Rates with Poor Credit
- Shop Around: Don’t settle for the first quote you receive. Compare rates from multiple insurers to find the best deal.
- Improve Your Credit: Work on improving your credit score over time. Even small improvements can lead to lower premiums.
- Consider Discounts: Many insurers offer discounts for things like bundling policies, maintaining a good driving record, or having safety features in your vehicle.
- Raise Your Deductible: Increasing your deductible can lower your premium, but make sure you can afford the higher out-of-pocket cost in case of a claim.
- Get a Quote for Your Car: Use online tools to get a quote for your car from different insurers, which can help you compare and choose the best option.
Navigating car insurance with a low credit score can be challenging, but by understanding how your credit score affects your rates and comparing different insurers, you can find a policy that fits your needs and budget. Whether you’re aiming for the highest credit score possible or working with the starting credit score, taking proactive steps can help you secure more affordable insurance. Remember, improving your credit score over time will not only benefit your car insurance rates but also your overall financial health.