How to Get Cheap Car Insurance with Bad Credit

October 18, 2017

Credit card laptop

So you went through a rough patch and had trouble paying all your bills — it happens to almost everyone at some point. Now your credit score sucks, and you need to cut your monthly expenses if you want to improve it. But cheap car insurance for bad credit is really hard to find. Ugh. You feel stuck.

Why is it hard to find cheap car insurance with bad credit?

Your credit score isn’t just a number. It indicates how likely you are to pay your bills on time and make good on your debts. Of course that matters to car insurance companies — they want to know that you’ll pay your premiums, right?

Well, the relationship between bad credit and auto insurance is more nefarious than that. Car insurance companies believe your credit history also reveals how likely you are to file a claim. In other words, how likely is it that you’ll cost them money down the road? They scour your credit report to pick out the details they’re interested in, then compile them into a proprietary credit score only used by insurers. A little creepy, right?

“And if they think that your credit isn’t up to their highest standard, they will charge you more, even if you have never had an accident,” Consumer Reports says. Their data shows that bad-credit single drivers’ premiums cost $68 to $526 more per year, on average, than similar drivers with the best scores. Ouch. So how can you find cheap car insurance for bad credit? We asked some of the experts here at Compare.com for their advice.

1. Move to a state where bad credit doesn’t affect car insurance

Extreme? Maybe. Effective? Yes. The effect of bad credit on car insurance varies dramatically from state to state, because each state has different laws and regulations governing how car insurance rates are set. This map from Consumer Reports shows that your odds of scoring cheap car insurance with bad credit depend dramatically on which state you live in. In North Carolina, bad credit may add $320 to your yearly premium. That’s nothing compared to states like Michigan, where bad credit adds an average of $3,354 to the premium for an adult single driver with a clean record, or Florida, where the bad-credit bump is $2,417. The worst part is that, in many states, a good driver with bad credit will pay more than someone with a DWI who has excellent credit. It’s just not fair.

Three states — California, Hawaii and Massachusetts — don’t let car insurance companies consider credit scores when setting insurance premiums. If your employment is flexible, or if you just want a fresh start, it may be worth moving so you can save $3,000 or more on your car insurance.

Beater car

2. Downgrade your car

If you’re paying off a car loan on a pretty new or nice car, maybe it’s time to trade it in for a hooptie. We know it doesn’t feel right — it’s hard to announce to the world, “Yeah, this is the best car I can afford.” But driving a beater car has its advantages, as long as you’re not constantly breaking down. One, you won’t have those big car payments anymore (and you can focus on paying off your credit cards instead). Two, you may be able to drop collision/comprehensive coverage, which reduces the cost of bad-credit car insurance.

3. Compare quotes for bad-credit car insurance

To find cheap car insurance when you don’t have great credit, you have to get as many quotes as you can. The quickest and easiest way to do that is on compare.com, where you can get multiple quotes in minutes. Some people wonder, “Does shopping for insurance affect my credit score?” It doesn’t! Insurance companies do a “soft pull” on your credit history, so your score won’t get dinged.

Even after you’ve found the cheapest car insurance, keep comparing quotes every year. As your credit score rises, car insurers will keep competing to offer you the lowest premiums.

4. Seek out insurers that offer cheap car insurance with bad credit.

Look, you’re not the only driver out there with a less-than-perfect credit score. There are many, many insurance companies that specialize in cheap car insurance for people without great credit, such as Direct General and Good2Go. Or better yet, find a carrier that doesn’t use credit at all, like First Chicago or Dashers Insurance.

5. Explain the circumstances to your insurer

Even in the cold, corporate world of car insurance, you may be able to find a little sympathy. Many insurance companies, for example, say that if your credit has suffered because of an extraordinary life event your premium may be reconsidered. Examples of an extraordinary life event include natural disasters (like Hurricanes Irma or Maria), divorce, the death of a family member or losing your job.

6. Take a really close look at your credit report

Credit reporting agencies make mistakes all the time. You may even be a victim of fraud, which can hurt your credit. Get your complete credit report (not just the score) from annualcreditreport.com. That’s the federally authorized site for free credit reports. Look at everything listed. Are there accounts you never had? Closed accounts reported as open? Accounts that appear multiple times with different creditors listed? Get these errors fixed right away. Here’s how.

7. Work to lift your credit score even a little bit

You don’t need a perfect 850 credit score to score cheap car insurance. For example, Experian considers a score of 580-669 to be fair, which lands you in the realm of subprime borrowers. Nudge it up to 670, and you’re suddenly ranked “good,” the largest category. From car insurers’ perspective, 620 is the number to beat. If your score is below 620, you may see the largest jump in car insurance premiums. It takes time, but one day you’ll see your score rise and your car insurance bills drop.

Compare.com makes it easy to compare cheap auto insurance rates and save money, whatever your credit situation. Put in your info just once and get multiple, personalized quotes, for free.

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You could save up to 32% by using Compare.com!

Based on a survey of 100 California Residents. Average savings determined via a comparison of their selected policy against their self-reported annual premium.