Car Insurance with Bad Credit (2026 Guide)
In most states, your credit history influences your car insurance rate through a credit-based insurance score. If your credit is poor, here's why — and what you can do about it.
Most insurers in most states use a credit-based insurance score as a rating factor, because it statistically correlates with claim likelihood. Drivers with weaker credit often pay more than those with strong credit, all else equal. A handful of states restrict or ban the practice entirely.
This guide explains how it works, where it's banned, and the levers that help if your credit is low.
What a credit-based insurance score is (and where it's banned)
A credit-based insurance score is a rating tool derived from parts of your credit history — payment history, outstanding debt, credit age. It's not the same as a lending FICO score, and it can't be used to deny you coverage, only to help set your rate. California, Hawaii, Massachusetts, and Michigan restrict or prohibit its use in auto insurance, so credit doesn't factor into your rate there.
- •Uses elements of credit history to help set your premium
- •Different from a lending credit score
- •Banned/restricted for auto insurance in CA, HI, MA, and MI
- •Cannot be used to deny coverage — only to price it
Why bad credit raises your rate
Insurers price on statistical risk, and their data links lower credit-based insurance scores to higher claim frequency and cost. So in states that allow it, weaker credit typically means a higher premium, sometimes substantially. This is why two identical drivers can pay very different rates based on credit alone.
- •Lower scores correlate with higher claim risk in insurer data
- •Credit can be one of the larger rating factors where it's allowed
- •The effect disappears entirely in states that ban the practice
How to lower your rate with bad credit
You have two paths: improve the credit factor over time, and shop carriers that weight it less. Improving credit (on-time payments, lowering balances) gradually helps; meanwhile, some insurers weigh credit more heavily than others, so comparison shopping matters even more when your credit is weak.
- •Improve credit over time — on-time payments, lower balances
- •Shop widely; insurers weight credit very differently
- •Ask about pay-in-full and telematics discounts to offset the credit factor
- •If you live in CA, HI, MA, or MI, credit doesn't affect your auto rate at all
Car Insurance with Bad Credit (2026 Guide) — FAQ
Does credit affect car insurance?
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In most states, yes — insurers use a credit-based insurance score as a rating factor because it correlates with claim risk, so weaker credit often means a higher premium. It's different from a lending credit score and can't be used to deny coverage, only to price it. California, Hawaii, Massachusetts, and Michigan restrict or ban its use for auto insurance.
Which states ban credit-based car insurance pricing?
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California, Hawaii, Massachusetts, and Michigan restrict or prohibit insurers from using credit as a rating factor for auto insurance. In those states, your credit history doesn't affect your car insurance premium. Everywhere else, credit is commonly one of the factors, though how heavily it's weighted varies by insurer.
How can I get cheaper car insurance with bad credit?
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Shop widely, because insurers weight credit very differently — the spread between carriers is larger when your credit is weak. Improving your credit over time (on-time payments, lower balances) gradually helps, and discounts like pay-in-full and telematics can offset the credit factor. If you live in a state that bans credit-based pricing, credit isn't a factor at all.
Keep researching
Sarah Mitchell
Editorial Lead, Property & Casualty
This article was researched and written by the Cover Forge USA editorial team against federal sources (NAIC, CMS, FEMA, DOL, SSA, state DOIs) and standard policy forms. Bylines organize content by topic — they do not assert individual licensure. See our editorial-policy for details.
Reviewed June 2026
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