Having a bad credit score isn't a death sentence when it comes to car insurance.
Finding cheap car insurance with bad credit is a difficult task. On average, drivers with poor credit pay 50% more for car insurance. This comes out $116 more per month for car insurance because of their credit score. In order to find you the best rates with bad credit, we created a user profile and got car insurance quotes from top insurance companies in the US. Let's see which insurance provider has the cheapest rates.
Using a profile outlined here, we surveyed 7 companies to see which company offered the cheapest rates for drivers with generalized credit scores. Those with very poor credit (between 300-579) pay an average of $2,646 per year for auto insurance, across the surveyed insurers.
Average Annual Premium for Bad Credit
|Car Insurance Company||Very Poor (300-579)||Fair (580-669)|
Nationwide is the cheapest insurance company for car insurance with credit ranging from poor to fair. Bear in mind Nationwide is only the cheapest company for our user profile. Your best bet for finding affordable insurance is to compare as many insurers as possible.
Car insurance companies try to use as much data as possible in order to predict the risk presented by prospective customers. Using their own historical data and information from the Federal Trade Commission, they have deduced that drivers with poor credit tend to file more claims than do drivers with excellent credit.
Data show that when drivers with worse credit do file a claim, the payout by the insurance company tends to be higher than payouts to other credit pools. All in all, this makes drivers with better credit scores cheaper to insure — thus, their premiums are lower.
This is a hard question to answer because it depends on the state. So far, California, Hawaii, and Massachusetts are the only states that do not use credit score as a rating factor. If you live in those states, it’s safe to say your insurance isn’t being impacted by your credit score.
Another option to consider is usage-based insurance programs. These companies, outlined here, use the way you drive to determine your premium. Although your credit score is still a factor in some of the programs, if you're a safe driver this might be a good option for you.
Because your credit score is a pivotal non-driving rating factor, it will be hard to negate its effects with a few discounts. But by doing your homework and trying to get as many discounts as possible, you could rack up some savings. Let's explore.
Being smart with your claims means don’t file a claim unless the damages to your vehicle are greater than your deductible and the rate increase you will receive. For example, in Texas, an at-fault accident raised car insurance rates in 2017 an average of 43%. The average premium in Texas is $1,810. Meaning, after an at-fault accident, your rates will bump up to $778 a year making your total premium $2,588.
Now, you should also consider that most insurance companies will raise your rates for 3 years after an at-fault accident. So that 43% increase will stay on your premium for 3 years. Making that $778 jump up to $2,334. That increase alone is more than the value of your premium without any violations on your record.
So, when thinking if it’s worth it to file a claim, you should think what the estimated cost of repairs is versus what you would end up paying after your rate is increased. To find out what you would be paying for your state, see our State of Insurance data here.
Unlike fine wine, your car depreciates pretty rapidly. What this means in terms of insurance savings is that the coverage you once had on your 1999 Geo might not be necessary anymore. Here how to tell:
Vehicles that have a lien or loan are usually required to maintain physical coverage as the lienholder has a vested insurance in the vehicle.
You can determine this through Kelley Blue Book or NADA.
Ask your insurance company how much premium your collision and comprehensive is per policy period. If the value of that premium is greater than the cost of your vehicle plus your deductible, you probably don’t need it. These coverages are designed to cover you in the event of a total loss, but if you’re paying more to insure the vehicle than you would get from a claims payout, you’re probably losing money.
If you go through these steps and determine you do need coverage, consider raising your deductible. This will not only discourage you from filing a claim but help lower your premium. By taking away some of the financial responsibility away from your insurance company, you lower your premium.
Follow our lead and shop with as many companies as possible in order to find the cheapest rate for you. Don’t be afraid to look at non-standard companies (i.e., the ones you haven’t heard of) as they may be more inclined to offer you a better rate than some of the bigger names.
If you're still looking for more ways to save or more information on rating factors and car insurance, check out our additional resources.
Between September and December 2017, The Zebra conducted comprehensive auto insurance pricing analysis using its proprietary quote engine, comprising data from insurance rating platforms and public rate filings. The Zebra examined nearly 53 million rates to explore trends for specific auto insurance rating factors across all United States zip codes, averaged by state, including Washington, DC.
Analysis used a consistent base profile for the insured driver: a 30-year-old single male driving a 2013 Honda Accord EX with a good driving history and coverage limits of $50,000 bodily injury liability per person/$100,000 bodily injury liability per accident/$50,000 property damage liability per accident with a $500 deductible for comprehensive and collision. For coverage level data, optional coverage (that must be rejected in writing) is included where applicable, including uninsured motorist coverage and personal injury protection.
National property and casualty losses information is from the Insurance Information Institute and the NOAA National Centers for Environmental Information U.S. Billion-Dollar Weather and Climate Disasters report.
For vehicle make and model data, analysis referenced the most popular vehicles in the U.S. by 2016 year-end sales according to Goodcarbadcar.net’s automakers’ data.
Finally, some rate data may vary slightly throughout report based on rounding.
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