Car Insurance With Bad Credit: Why It Costs More and How to Pay Less
In most states, insurers can use credit-based insurance scores to set prices. In NerdWallet's 2026 analysis, poor credit raised full-coverage premiums by 67%. Here is how it works and what you can do.
Many drivers are surprised to learn that their credit history can affect their car insurance price as much as a ticket or an accident. In most states it is legal, and the difference can be large. Here is how it works and what you can do about it.
How insurers use credit
The NAIC notes that in most states it is legal for insurers to use credit-based insurance scores as a pricing factor. These scores are built largely from your credit report, but, as Experian explains, they estimate how likely you are to file claims that cost the insurer money, not how likely you are to miss payments. Regulators generally don't allow credit to be the only reason for an insurance decision.
How much more bad credit costs
NerdWallet's 2026 analysis priced the same 35-year-old driver with a clean record and different credit levels:
| Driver profile | Full coverage per year | Minimum coverage per year | Change (full coverage) |
|---|---|---|---|
| Clean record, good credit | $2,361 | $648 | - |
| Clean record, poor credit | $3,954 | $1,030 | +67% |
| For comparison: good credit, one at-fault accident | $3,524 | $952 | +49% |
Source: NerdWallet, 2026, median rates from public insurer filings; poor credit uses approximated credit tiers.
In that analysis, poor credit cost the driver more than an at-fault accident did.
States that ban or restrict credit in auto insurance
| State | Rule |
|---|---|
| California | Insurers don't use credit for auto underwriting or rating |
| Hawaii | Credit can't be used to set underwriting standards or rating plans |
| Massachusetts | Credit can't be used to set rates, underwrite new policies or renew |
| Michigan | Credit can't be used to set rates or to deny, cancel or refuse renewal; it may be considered for installment payment options |
| Maryland | Credit can help set the rate on a new policy, but can't be used to deny, cancel, refuse renewal or raise premiums at renewal |
| Oregon | Credit can't be used to cancel or refuse renewal; only limited use when first offering a policy |
| Utah | Credit can't be the sole factor; after 60 days it can only be used for discounts, not surcharges |
Source: Experian, March 2025. Laws change; check your state insurance department for current rules.
Your rights
- Adverse action notice. If information in your credit report leads an insurer to charge you more, federal law requires it to tell you, and you are entitled to a free copy of the report it used.
- Dispute errors. You can dispute inaccurate information with the credit bureaus. Corrected errors can lead to a better price.
How to pay less with bad credit
- Check your credit reports for errors before you shop, as the NAIC recommends, and dispute anything that is wrong.
- Compare many insurers. Each one weighs credit differently, so the spread in prices can be large.
- Lean on other discounts: bundling, paying in full, safe-driving programs and a higher deductible. See 12 ways to lower car insurance.
- Consider usage-based insurance if you drive safely and not too much; your driving behavior can count for more than your credit.
- Ask for a re-rate as your credit improves, and shop again at renewal.
- Avoid a lapse in coverage, which can add another surcharge on top of credit. See car insurance after a lapse.
Frequently asked questions
Is a credit-based insurance score the same as my credit score?
No. It is built mostly from your credit report, but it is designed to predict insurance claims rather than missed loan payments. Insurers use it alongside your driving record, location and other factors.
Does checking insurance quotes hurt my credit score?
Insurance quotes generally use a soft inquiry, which doesn't affect your credit score. You can compare several insurers without worrying about your credit.
Can I get car insurance with no credit history?
Yes. Insurers will still quote you. Depending on the state and insurer, a thin credit file may be priced as neutral or slightly higher. Comparing several insurers is the best way to find a fair price.
Will my insurance go down if my credit improves?
It can. Insurers may update your credit-based score at renewal, or you can ask your insurer to re-check it. Shopping around after your credit improves can also help.
Sources
- Average Cost of Car Insurance (rate analysis, 2026), NerdWallet
- Which States Restrict the Use of Credit Scores in Determining Insurance Rates? (March 18, 2025), Experian
- Does your vehicle have the right protection? Best practices for buying auto insurance, NAIC
Sources were checked on October 14, 2026. Laws, fees and prices change; always confirm with your state agency or insurer.